Thursday, 30 June 2016

Billions of shares fail to settle - every month - you and I don't care

Let me advise you that you don't care enough to be reading this. The good grace of the financial system depends on the fact that you don't care. Outrage would be outrageous.

Three to eight billion shares a month don't settle fairly in the USA.1
Fails-to-deliver from SEC data (click to enlarge)

That's, umm, carry the 4, divide by, nearly, ... well, quite a lot, gazillions, of shares failing to settle every single trading day. A relentless daily fail that begs a lawsuit from the poor crash test dummy being so harshly treated on a real highway.

That's right. It's a combination of billions of shares are not being provided at settlement time and billions of dollars of cash not being handed over for the shares.

That's more shares than a modest sized broker, such as ITG, will trade in a month.2

Think about it. Dummies 'R' us. You have to ask yourself, why are you bothering to pay for your shares? Did you receive any if you did? No one else seems to be. If you can't tell who the patsy sitting at the table is, maybe it's time to get up and walk the patsy walk-of-shame right out the door?

Then again, perhaps it's just that your broker has decided not to accept cash deposits? Perhaps true, on those days pigs do the flying.

This is a fairly large problem the US stock market has been suffering from for years, yet almost no-one cares. I'm not sure I care that much, really, but I find it fascinating that my neck strains as I drive past this particular car crash. It's peak hour. No emergency workers. It's been there a while. I'm sure someone has reported it. Surely? Someone else's problem? Let's just keep driving.

The first step in fixing a problem is acknowledging you have a problem.

Reg SHO3 4 is a weird piece of regulation that allows cascading forgiveness after three days, four days, six days, thirteen days, really just post us a cheque after your seventy fifth grandmother's funeral. We'll believe you. Again. DTC and friends have ways and means of covering some of the mess with loans and the like. The system grinds along, burps, hiccoughs, gently passes wind, and works, but really? Do you think that billions of shares each month failing to settle properly is acceptable?


I've bothered enough with this post-midnight key pressing. Neither you nor I really care. Oh look, a kitten juggling...


  1. SEC Frequently Requested FOIA Document: Fails-to-Deliver Data — Archive Data

    Month Share count
    2016-05 3,832,604,464
    2016-04 5,396,516,212
    2016-03 5,361,822,492
    2016-02 4,075,451,298
    2016-01 3,491,030,621
    2015-12 4,273,095,148
    2015-11 3,722,780,135
    2015-10 3,785,306,033
    2015-09 4,042,064,067
    2015-08 4,627,460,196
    2015-07 4,497,504,552
    2015-06 5,198,740,638
    2015-05 5,704,774,580
    2015-04 6,113,514,671
    2015-03 7,917,498,897
    2015-02 4,605,827,759
    2015-01 4,334,908,571
    2014-12 7,523,069,694
    2014-11 4,464,215,173
    2014-10 5,738,841,338
    2014-09 4,136,113,625
    2014-08 4,981,989,371
    2014-07 5,015,205,048
    2014-06 3,363,337,381
    2014-05 4,068,313,502
    2014-04 3,637,234,218
    2014-03 4,485,271,972
    2014-02 5,207,596,019
    2014-01 4,188,227,875
  2. ITG Inc, the ever shrinking broker, traded 2,600,661,892 shares in May 2016.
  3. Reg SHO SEC's Key points
  4. Reg SHO SEC's Frequently Asked Questions

1 comment:

  1. The fact that its billions of shares a month is wild! However you should note that when shares fail to deliver so does money. DTCC will not deliver the money without the stock. They will mark to market and they will adjust a broker's clearing fund accordingly including a little something extra for volatility. NSTAFL.

    Unless you believe that their clearing funds aren't appropriately covering risk then there's probably nothing to see here. Oh, but of course their clearing funds aren't appropriately covering risk :)