Direct Answer

A fail to deliver (FTD) is a position that exists when a seller's broker has not delivered the shares owed to the buyer's broker by the contractual settlement date, currently T+1 (trade date plus one business day) for U.S. equities. The selling broker owes those shares to the clearinghouse (NSCC) through the continuous net settlement (CNS) system, which nets all obligations across counterparties and carries unresolved positions forward. Regulation SHO mandates that broker-dealers with persistent FTDs in a security on the Threshold Securities List must close out those fails within defined time windows by purchasing shares in the open market. FTDs do not automatically cancel a trade: the buyer's account typically reflects ownership and can exercise most rights, but the unsettled position creates counterparty credit exposure and, in volume, can affect a stock's price and short interest picture.

  • Settlement cycle: U.S. equities moved to T+1 on May 28, 2024; a fail begins the morning after settlement was due.
  • The NSCC nets obligations: Individual counterparty fails are pooled through continuous net settlement, one netting counterparty, the NSCC, stands between buyer and seller.
  • Reg SHO close-out rule: For securities on the Threshold List (threshold = 10,000 shares and 0.5% of outstanding fails for five consecutive settlement days), broker-dealers must close fails by T+13 (T+35 for certain securities).
  • FTD data is public: The SEC publishes aggregate FTD data twice monthly, with a two-week lag, on its website.
  • Not synonymous with naked short selling: FTDs can arise from operational delays, borrow failures, and legitimate market-making activity, not all FTDs indicate abusive short selling, though naked short selling is one cause.

What settlement failure mechanics change for a real user

Most retail investors never directly experience an FTD in their own account, their broker absorbs the operational problem at the clearinghouse level and the investor's position shows as owned. But understanding how FTDs work changes three practical decisions:

1. Reading FTD data when researching a stock. The SEC's published FTD data is widely cited in communities following heavily-shorted or illiquid stocks. A spike in FTDs can signal genuine settlement stress, a security with 5 million shares failing daily on a float of 20 million shares has a structural problem worth understanding. But FTD data is also regularly misinterpreted: a high raw FTD number for a high-volume security may reflect ordinary operational settlement lag, not manipulative naked shorting. Understanding the NSCC's netting and CNS mechanics is necessary to interpret the numbers correctly.

2. Understanding short squeeze dynamics in FTD-heavy securities. When a security enters the Threshold Securities List and broker-dealers face mandatory close-out requirements, buying pressure to cover fails can compound with other short-covering demand. The mechanics of Reg SHO close-outs are one reason FTD data gets attention from traders monitoring potential short squeezes. The connection is real but oversimplified in retail discourse: not every Threshold List entry leads to forced buying, and bona fide market maker exemptions under Reg SHO reduce the mandatory close-out population significantly.

3. Evaluating counterparty and settlement risk in less liquid markets. In thinly traded securities, ETFs, or bonds, settlement fails can have more direct consequences: a buyer waiting on shares cannot re-sell, lend, or use the position as margin collateral until settlement completes. For active traders in these markets, knowing when your counterparty's fail might delay your own downstream transactions matters for trade planning.

What FTDs do not change for most retail investors: In a standard brokerage account at a large U.S. broker, an FTD in a security you bought does not prevent you from selling that position, receiving dividends, or voting shares, the NSCC's guarantee and your broker's operational procedures insulate you from the counterparty's failure. The risk falls on the clearinghouse and ultimately on clearing fund participants, not individual account holders.

Mechanics and definitions

The settlement cycle: T+1 and what "fail" means

When a U.S. equity trade executes, the parties agree to exchange shares for cash on the settlement date. Under the current T+1 regime (effective May 28, 2024, implementing SEC Rule 15c6-1 amendments), settlement is due one business day after trade date. If the seller's broker has not delivered the shares to the NSCC's participant account by the opening of the following business day, a fail to deliver is recorded against that broker's position at the clearinghouse.

The term "fail to deliver" is recorded from the seller's perspective: the failing party did not deliver what was owed. The mirror position from the buyer's perspective is a "fail to receive", the buying broker expected shares and has not received them. In practice, the NSCC sits between counterparties, so individual buyer and seller firms deal with the clearinghouse rather than each other directly.

Continuous net settlement (CNS): how the NSCC handles fails

The NSCC's continuous net settlement system nets all buy and sell obligations in a given security across all participant firms daily. Rather than processing thousands of bilateral deliveries, CNS produces a single net position for each firm, a net obligation to deliver (short position in CNS) or a net entitlement to receive (long position in CNS). A firm with a fail to deliver carries a negative CNS balance in that security, which rolls forward each night until resolved by delivering shares or receiving shares through subsequent trades that offset the position.

This netting is essential to market efficiency: it dramatically reduces the gross volume of shares that need to physically move through DTC (the Depository Trust Company, which holds securities on behalf of NSCC participants). Without netting, settlement infrastructure would need to process every individual trade's delivery separately, multiplying settlement costs and fails. The tradeoff is that netting obscures the bilateral counterparty identity behind an FTD, the buyer cannot directly identify which seller failed.

How an FTD position accumulates

A broker's CNS fail balance grows each settlement day that the fail is not resolved. The NSCC marks the failing position daily. Cash obligations are typically handled separately through a money settlement process, so the buyer's cash may already be posted even while the shares have not arrived. The NSCC's guarantee fund and clearing fund are available to cover losses if a participant fails entirely, but individual share delivery is still expected from the failing participant.

Common causes of FTDs include:

  • Locate failures in short sales: A broker sells shares short but the borrowed shares cannot be located or the lender recalls them before delivery is due. This is the most widely cited cause in retail discussions of FTDs.
  • Corporate actions and reorganizations: Mergers, splits, spin-offs, and symbol changes create temporary settlement complexity that produces mechanical fails unrelated to short selling.
  • Operational errors: Clerical errors in DTC instructions, account transfers in progress, and system issues at clearing or custody levels can delay delivery.
  • Bona fide market making activity: Market makers providing liquidity in thinly traded securities may sell short without a pre-arranged borrow, relying on their bona fide market maker exemption under Reg SHO. If they cannot arrange a borrow before settlement, a fail results.
  • Naked short selling: A seller short-sells shares with no intent or ability to borrow, speculating that prices will fall and the position can be closed before delivery is required. Naked short selling is generally prohibited under Reg SHO, though regulatory enforcement capacity and exemptions complicate the picture.

Regulation SHO: the close-out framework

Regulation SHO (SEC Rule 203 and Rule 204) establishes the framework governing short sale locate requirements and mandatory close-out of FTDs. The key provisions are:

Regulation SHO key provisions relevant to FTDs
Provision What it requires Who it applies to
Locate requirement (Rule 203(b)(1)) Before effecting a short sale, a broker-dealer must have reasonable grounds to believe the security can be borrowed and delivered on the settlement date Broker-dealers; bona fide market makers have a limited exemption
Close-out requirement (Rule 204) Broker-dealers with FTDs at the NSCC must close those fails by purchasing or borrowing shares by a specified deadline Broker-dealers that are participants in a registered clearing agency (NSCC)
Standard close-out deadline (Rule 204(a)(1)) FTDs in equity securities must be closed no later than the beginning of regular trading hours on the settlement day after the fail date (T+1 from the fail date) Standard securities; same deadline regardless of Threshold List status
Threshold Securities List Securities with aggregate FTDs at NSCC of 10,000 or more shares and 0.5% or more of outstanding for five consecutive settlement days appear on the Threshold List Self-regulatory organizations (SROs) publish this list; brokers must track it
Extended close-out (Rule 204(a)(2)) For threshold securities with fails that persist, broker-dealers that are not able to borrow or purchase shares must restrict future short sales in that security Broker-dealers; pre-borrow requirements restrict new short sales until fail is resolved
Market maker exemption Registered market makers acting in a bona fide market-making capacity have a limited exception from the locate requirement (not from close-out) Registered market makers only; close-out still required at T+3 from the fail date

The Threshold Securities List

The Threshold Securities List is published daily by SROs (currently FINRA and the national securities exchanges) and identifies equity securities that have crossed the FTD threshold defined in Reg SHO: aggregate fails at the NSCC of at least 10,000 shares and at least 0.5% of shares outstanding for five consecutive settlement days. The list has both entry and exit criteria: a security exits only after its FTDs drop below the threshold for five consecutive settlement days.

Entry onto the Threshold List triggers additional reporting requirements and, for broker-dealers that still carry fails after the standard close-out deadline, restrictions on further short sales until the fail is resolved. These restrictions are the mechanism that creates potential forced buying: a broker-dealer that cannot continue to accumulate short positions without a pre-arranged borrow may face practical constraints on maintaining a short position, which can reduce supply of short sales in the stock.

Buy-in procedures

A buy-in is a compulsory purchase of shares to satisfy an unresolved delivery obligation. Buy-ins can be initiated by the NSCC (through its stock borrow program or buy-in procedures) or by the receiving broker if delivery does not arrive by an agreed-upon deadline. In the NSCC's continuous net settlement environment, buy-ins are less common than in bilateral settlement systems: the CNS system allows a failing broker to remain in fail status while the NSCC continues to guarantee delivery through its stock borrow program, which temporarily lends shares from long position holders to cover fails.

When the NSCC's stock borrow program cannot cover a fail (because there are insufficient lendable long positions in the system), the NSCC may initiate a buy-in to close the gap. Individual investors are rarely directly affected by these procedures, but a security under sustained buy-in pressure can experience abnormal buying demand that is unrelated to fundamentals.

Worked example: a short-sale fail from locate to close-out

All parties, positions, and prices in this example are hypothetical and illustrative. They do not represent any actual broker, security, or settlement event.

stock exchange trading floor Fails Deliver Settlement short sale
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Assumptions: Trade date is a Monday. The security settles T+1 (settlement due Tuesday). Prices are hypothetical. The broker is an NSCC participant. The security has a float of 10 million shares.

Day 1 (Monday, trade date): the short sale

Broker A's client places a short sale order for 50,000 shares of stock XYZ at $20.00. Broker A locates shares to borrow from a lending firm (Lender B), receives a "soft" locate confirmation, and executes the trade. The trade reports to the NSCC: Broker A owes 50,000 shares to the NSCC by Tuesday's settlement.

Overnight, Lender B recalls the loan, it needs the shares back because its own client wants to sell. Broker A cannot find an alternative borrow before Tuesday morning. Broker A cannot deliver 50,000 shares at settlement.

Day 2 (Tuesday, settlement date): the fail is recorded

The NSCC records a fail to deliver of 50,000 shares against Broker A's CNS account. The NSCC uses its stock borrow program to source shares from other participants' long positions and credits the buying broker's account, the buyer does not experience a disruption. Broker A now carries a negative CNS balance of 50,000 shares.

Under Rule 204, Broker A must close this fail no later than the beginning of regular trading hours on Wednesday (T+1 from the fail date). If Broker A cannot borrow or purchase shares by Wednesday morning, it must restrict all further short sales in XYZ until the fail is resolved.

Days 2-6: the fail persists and XYZ enters the Threshold List

Suppose Broker A manages to reduce the fail to 30,000 shares by buying in a portion on Wednesday, but the remaining 30,000 shares continue to fail because the borrow market for XYZ has tightened significantly (high borrow demand, low float). The aggregate FTDs across all brokers at the NSCC in XYZ now total 80,000 shares (0.8% of 10 million shares outstanding) for five consecutive settlement days. XYZ is added to the Threshold Securities List.

Broker A, still carrying 30,000 shares in fail, must now pre-borrow any additional short sale it wishes to execute in XYZ before placing the order. It cannot rely on a soft locate. This effectively raises the cost of shorting XYZ: the borrow rate increases as demand for hard-to-borrow shares rises, and some brokers may be unable to source borrows at any available rate.

Resolution: forced close-out

If Broker A still cannot borrow 30,000 shares after exhausting available lenders, its remaining option under Reg SHO is to purchase 30,000 shares in the open market, closing the fail. This purchase adds 30,000 shares of demand to XYZ's order flow on the close-out date. If multiple brokers are simultaneously closing out fails in XYZ, the aggregate purchase demand can be meaningful relative to the stock's normal daily volume, contributing to short-term price appreciation.

Key insight from this example: The fail originated from a legitimate borrow that was recalled, not from abusive naked shorting. Yet the resulting FTD triggered the same Reg SHO mechanics. Distinguishing the causes of a given FTD spike from the regulatory consequences requires looking at the borrow market data, not just the FTD report.

Failure modes: what can go wrong with settlement

Settlement failures create several types of downstream risk, depending on the magnitude of the fail, the security involved, and the clearing environment:

  • Liquidity strain in the borrow market. An FTD-heavy security tends to become hard-to-borrow as lenders pull shares and locate availability shrinks. This raises the cost of maintaining short positions and can create asymmetric pressure, short sellers face higher costs while buyers are unaffected, which can drive temporary price appreciation unrelated to fundamental value.
  • Cascade effects from forced close-outs. When multiple broker-dealers face simultaneous Reg SHO close-out obligations in the same security, their mandatory buy-ins may arrive in a compressed window. In illiquid securities, this concentrated buying demand can gap the price significantly, making close-outs more expensive and potentially triggering additional buy activity from momentum traders observing the move.
  • Misinterpretation of FTD data. The SEC's published FTD data is aggregate, two weeks lagged, and does not distinguish between causes (legitimate operational delays versus naked short selling). Using raw FTD figures as a signal for short squeeze potential without adjusting for security-specific float, borrow availability, and Threshold List status leads to incorrect conclusions in both directions, seeing manipulation where there is none, and missing genuine settlement stress.
  • Counterparty risk in bilateral markets. In markets that clear bilaterally (certain OTC bonds, some repo transactions, and non-U.S. markets without central clearing), a fail to deliver does not benefit from NSCC guarantee fund protection. The receiving party bears direct counterparty credit risk if the failing party defaults while the delivery obligation is open.
  • Corporate action complications during fails. If a company declares a dividend or record date while an FTD is open, the receiving party may not receive the entitlement on time. The NSCC has procedures for handling dividend entitlements on fail positions, but they introduce complexity and potential disputes about the correct compensation amount.
  • Bona fide market maker exemption abuse. The exemption that allows registered market makers to short without a prior locate has been a target of regulatory scrutiny, since abusers can claim market-making status to avoid locate requirements. The SEC and FINRA have pursued enforcement actions where the exemption was invoked without genuine market-making activity. For investors. This means FTDs in a security with active market-making can be harder to interpret: not all of them represent manipulation.

Risk, limitations, and when this concept does not apply

FTDs are a lagging indicator

The SEC's published FTD data is released twice monthly with approximately a two-week lag. The data reflects aggregate positions at NSCC as of the reporting date, not real-time fails. Traders using FTD data to predict near-term price action are working with stale, aggregated figures that have already been partially resolved through the regulatory close-out process. The Threshold Securities List is more current. It is published daily, but it captures only the securities that have crossed the 0.5%/10,000-share threshold, not the full picture of fails below that threshold.

stock exchange trading floor Fails Deliver Settlement risk limitations
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NSCC netting obscures the true fail picture

The CNS system's netting means that published FTD data shows the net position after offsetting long and short obligations across all participants. A security with 1 million gross shares failing on each side might net to near zero in the published data. This netting is operationally appropriate, it reduces unnecessary settlement traffic, but it means the published FTD figure systematically understates gross settlement activity. Researchers and market commentators who treat the net number as equivalent to the gross fail volume are making a methodological error.

Not all FTDs indicate market manipulation

A recurring misconception in retail trading communities is that large or persistent FTDs are definitive evidence of illegal naked short selling or coordinated price suppression. FTDs arise routinely from operational causes, borrow recalls, corporate actions, system issues, and market-making activity, that have no manipulative intent and no price impact. Identifying which FTDs represent genuine market integrity concerns requires access to order-level data that regulators have but public markets do not. The published aggregate data does not support conclusions about intent.

Reg SHO protections are equity-specific

The Threshold Securities List, locate requirements, and close-out rules under Regulation SHO apply specifically to equity securities. Options, futures, bonds, ETFs (to varying extents), and crypto assets are governed by different frameworks, or, in the case of most crypto, by no equivalent regulatory close-out regime at all. Settlement fail risk in non-equity markets can be substantially higher, and buyer protections substantially weaker, than investors accustomed to the equity settlement framework may expect.

The T+1 transition did not eliminate FTDs

The move from T+2 to T+1 settlement in May 2024 was intended to reduce settlement risk by compressing the window during which a counterparty could fail. In practice, T+1 also compressed the window for borrowing shares before the settlement deadline, creating operational pressure on securities lending and potentially increasing fails in less liquid securities where borrow arrangements take longer to confirm. Whether T+1 net reduced FTD volumes or redistributed them to a different profile of securities is an empirical question that industry data is still being accumulated to answer.

How FTDs connect to Clearing, Settlement & Brokerage Mechanics

Fails to deliver are the most visible failure mode within the equity settlement system, they represent the point at which the operational machinery of clearing and settlement does not complete as expected. Understanding them requires grounding in the adjacent concepts that make up the Clearing, Settlement & Brokerage Mechanics cluster:

  • The T+1 settlement cycle: Every FTD is defined relative to the settlement date. Understanding when settlement is due, how the NSCC determines which obligations are outstanding, and what happens in the hours between trade execution and final settlement is prerequisite knowledge for interpreting FTD data correctly.
  • The NSCC and DTCC structure: The NSCC's continuous net settlement system, its clearing fund, and its stock borrow program are the operational infrastructure that absorbs most FTDs before they affect end investors. Understanding what the NSCC guarantees and what it does not is essential for assessing the true risk profile of settlement failures.
  • Securities lending and the short sale borrow market: Most FTDs that arise from short sales originate in the securities lending market, specifically, in locate failures, borrow recalls, or borrow rate spikes that make maintaining a short position economically prohibitive before settlement is due. The mechanics of securities lending, including how locate confirmations work and what a borrow recall means for an open short position, connect directly to the FTD creation process.
  • Margin and collateral requirements: Broker-dealers carrying fail positions may face margin calls or additional collateral requirements from the NSCC during the fail period. Understanding how the NSCC marks-to-market participant positions and what the clearing fund contribution requirements are explains why large FTD positions create operational pressure on the failing broker beyond the regulatory close-out obligation.

This page sits within the broader Market Structure & Trade Execution hub, which covers how trade execution connects to clearing, settlement, and the regulatory infrastructure that governs both. FTDs are the intersection where execution quality, short selling rules, securities lending, and clearing infrastructure all meet.

Practical checklist: evaluating FTD data and settlement risk

  1. Check the SEC's FTD data for the security in question. The SEC publishes aggregate FTD data twice monthly at sec.gov/data-research/sec-markets-data/fails-deliver-data. Note the publication lag (approximately two weeks) and use the data as a historical reference, not a real-time signal.
  2. Normalize FTDs against float and average daily volume. A raw FTD figure is not meaningful without context. Express FTDs as a percentage of float and as a multiple of average daily volume. A security with 5 million FTDs on a 500 million share float is different from the same FTD count on a 20 million share float.
  3. Check the Threshold Securities List. FINRA publishes the Threshold Securities List daily. A security on the list has crossed the regulatory threshold and broker-dealers face additional close-out constraints. Check both entry date and consecutive days on the list, longer duration means the fail has been persistent, not a one-day spike.
  4. Look at the hard-to-borrow rate and availability. Your broker's securities lending desk or a financial data provider can show borrow availability and rate for most equities. A security with high FTDs and a high borrow rate (reflected in the cost to short) confirms the settlement stress is real. A high FTD count with easy borrow availability at low rates suggests operational or corporate-action causes.
  5. Identify the cause category before drawing conclusions. Corporate events (merger, dividend, spin-off) near the reporting dates can produce mechanical FTDs with no market integrity implications. Check whether the company had any pending corporate actions coinciding with the FTD spike before concluding the data reflects short-selling activity.
  6. Distinguish the NSCC guarantee from individual counterparty protection. If you are a retail investor at an NSCC member broker, your ownership is protected by the broker and the clearinghouse even if your purchased shares are in a fail position. If you are trading in an instrument or market not covered by central clearing (certain OTC bonds, crypto, foreign markets), evaluate the counterparty risk directly.
  7. For active short sellers: confirm borrow before settlement. If you are short a hard-to-borrow security, verify borrow availability with your broker before each settlement date. A recall of your borrow position that arrives after trade date but before settlement gives you almost no time to arrange an alternative, understand your broker's procedures for handling same-day recalls.
  8. Do not treat FTD data as a buy signal. Elevated FTDs indicate potential future buying demand from close-outs, but they do not establish timing or magnitude. Securities with persistent FTDs have sometimes experienced short squeezes; others have continued declining as FTDs were resolved through price declines that made closing fails economical. The causal relationship between FTD data and price action is not mechanical.

This checklist is educational and illustrative. It does not constitute personalized investment, legal, or compliance advice. Regulatory requirements change, verify current rules with the SEC, FINRA, or a qualified professional.

stock exchange trading floor Fails Deliver Settlement practical checklist
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What a Fail-to-Deliver Number Can and Cannot Tell You

Published fail data is a settlement statistic, so the first thing to do with it is ask what would make it move. Fails accumulate for pedestrian reasons: a transfer that did not arrive in time, an administrative error, a mismatch between two firms' records, or a genuine inability to source shares. The published figure aggregates all of those, and it reports a balance rather than a count of new events.

The common misreading is to treat a rising balance as direct evidence of naked short selling. It is consistent with that explanation and with several others, and the data itself contains nothing that separates them. Reading it as a signal about a company's prospects goes a step further still, and the series was never constructed to carry that meaning.

Two things bound its usefulness. It is published on a lag, so it describes a settlement state that close-out requirements have usually already resolved. And a security can carry persistent fails while its price does nothing remarkable, which is a reminder that settlement pressure and price pressure are different quantities measured on different clocks.

Where it does help is context. A name that appears repeatedly is a name where borrow availability and delivery risk are worth investigating before a short position is opened rather than after.

Frequently asked questions

What exactly is a fail to deliver and when does it start?

A fail to deliver (FTD) is a settlement position recorded at the NSCC when a seller's broker-dealer has not delivered the owed shares by the settlement deadline. Under the current T+1 settlement cycle for U.S. equities, the settlement date is one business day after the trade date. The fail begins on the morning following the missed settlement date, so a trade executed on Monday must settle by Tuesday; if Tuesday passes without delivery, a fail is recorded against the selling broker starting Wednesday morning. The NSCC tracks these positions in its continuous net settlement (CNS) system and the failing broker's CNS balance reflects the undelivered quantity.

Does an FTD in a stock I bought affect my ownership?

In most retail account situations, no. When you buy shares through an NSCC-clearing broker and the counterparty fails to deliver, your broker's account is credited by the NSCC through its stock borrow program or clearing fund, you see the shares in your account and can generally exercise most ownership rights (selling, dividends, voting). The settlement problem exists at the clearinghouse level between the NSCC and the failing broker-dealer, not in your individual account. You would only be directly affected if your broker itself were the failing party and became insolvent during the fail period, a scenario covered separately by SIPC protection and NSCC risk management procedures.

Is a fail to deliver the same as naked short selling?

No, though naked short selling is one potential cause of an FTD. Naked short selling, selling shares without arranging a borrow beforehand, is generally prohibited under Regulation SHO's locate requirement. However, FTDs arise from many other causes: borrow recalls after trade date, corporate action settlement complexity, operational errors, and bona fide market-making activity under the limited market-maker locate exemption. Most FTDs at large brokers are the result of operational settlement logistics, not intentional naked shorting. Distinguishing the cause requires trade-level data that is not available in the SEC's published aggregate FTD reports.

What is the Threshold Securities List and does being on it mean something is wrong?

The Threshold Securities List is a daily publication by FINRA and the exchanges identifying equity securities where aggregate FTDs at the NSCC have exceeded 10,000 shares and 0.5% of outstanding shares for five consecutive settlement days. Entry onto the list triggers additional Reg SHO obligations for broker-dealers with fail positions in that security. Being on the list does not by itself indicate market manipulation or abusive short selling, it indicates that settlement of that security has been persistently incomplete at a scale above the regulatory threshold. Illiquid securities with small floats can appear on the list due to normal borrow market tightness; heavily traded securities can appear during periods of unusually high short interest or corporate events.

What happens when Reg SHO close-out requirements force a buy-in?

When a broker-dealer cannot borrow or purchase shares to close an FTD within the Reg SHO deadline, it must purchase (or borrow) the shares to close the fail, this forced purchase is sometimes called a close-out or buy-in. The broker must also restrict further short sales in that security until the fail is resolved, unless it can pre-arrange a borrow for each new short position. In practice, buy-ins add buying demand to the open market for the security on the close-out date. If multiple brokers face simultaneous close-out obligations, the aggregated demand can create short-term price pressure. The effect depends heavily on how many shares are being closed out relative to normal daily volume and available sell-side liquidity.

Where does the SEC publish FTD data and how current is it?

The SEC publishes aggregate FTD data on its website at sec.gov, under Data and Research / SEC Markets Data / Fails-to-Deliver Data. The data is published twice monthly, once for the first half of the month and once for the second half, with approximately a two-week lag from the as-of date. The files are downloadable in pipe-delimited format and contain daily aggregate FTD positions by security (identified by CUSIP and ticker), reported in number of shares and dollar value. The data reflects net CNS positions after the NSCC's multilateral netting, not gross bilateral fails. It is a useful historical reference but not a real-time signal: by the time the data is published, the close-out window under Reg SHO for many of the listed fails has already passed or is underway.

Did the move to T+1 settlement in 2024 change how FTDs work?

The shift from T+2 to T+1 settlement (effective May 28, 2024, under SEC Rule 15c6-1 amendments) reduced the window available to arrange share borrows between trade date and settlement date. Under T+2, a short seller had two business days to locate and confirm a borrow; under T+1, there is only one. For liquid securities with deep borrow markets, this change was largely operationally manageable. For hard-to-borrow securities or those with thin borrow availability, the compressed timeline increased the risk of a locate confirmation becoming unavailable before settlement is due. The NSCC's core mechanics, continuous net settlement, the clearing fund guarantee, and the stock borrow program, were not fundamentally changed by T+1, but the operational pressure on securities lending desks to confirm borrows faster became more acute.

Can I tell from public data whether FTDs in a stock are from naked shorting or legitimate causes?

No. The SEC's published FTD data is aggregate and does not include information about the cause, the identity of the failing broker, or the nature of the underlying position (covered short, naked short, market-making, corporate action, or operational error). Even researchers with access to FINRA trade reporting data cannot directly attribute individual FTDs to specific causes without order-level supervisory data that only regulators possess. The closest publicly available proxy is comparing FTD levels with securities lending borrow availability and rate data from market data providers: if a security has high FTDs and extremely tight borrow availability at high rates. That is consistent with genuine borrow failures. If borrow appears plentiful and cheap, the FTDs are more likely operational in origin.

How does a fail on the buy side differ from one on the sell side?

A failure to deliver arises on the delivering side, so the party expecting shares does not receive them on the intended date while the obligation remains outstanding. From the receiving customer's perspective, the position is typically already reflected in their account by the broker regardless, because the broker stands between them and the clearing process. The unresolved obligation sits between clearing participants rather than between the customer and their broker.

References

Regulatory framework cited in this article: All rule references reflect the regulatory framework as of August 7, 2026. Regulation SHO, the settlement cycle rules under Rule 15c6-1, and NSCC operating procedures can be amended, verify current requirements with the SEC, FINRA, NSCC, or a qualified professional.

Assumptions in the worked example: All positions, prices, share counts, borrow rates, and party identities in the worked example are hypothetical constructs for educational illustration. They do not represent any actual broker-dealer, security, or historical settlement event. Real settlement events vary significantly based on specific securities, borrow market conditions, and participant circumstances.

Next lesson

Next steps in this cluster:

Educational disclaimer

For education only; not personalized investment, tax, or legal advice. Trading can result in substantial losses.

Regulatory rules, settlement procedures, and market structure requirements can change. Verify current requirements with the relevant regulator, clearinghouse, or qualified professional before acting.