Also known as: fails to deliver · failed to deliver · failing to deliver · failure to deliver · non-delivery
Written by attorneys · grounded in primary & secondary sources — see below
2 senses
A broker's nondelivery of securities to the purchasing broker by the settlement date. The nondelivery may arise from naked short selling or other settlement failures and can trigger regulatory obligations even when not itself a violation of antifraud rules.
A seller's failure to deliver goods identified to a contract for sale. The buyer may recover damages measured by the difference between market price at the time the buyer learned of the breach and the contract price together with incidental and consequential damages.
Each sense below has its own examples, sources, and questions.
A broker's nondelivery of securities to the purchasing broker by the settlement date. The nondelivery may arise from naked short selling or other settlement failures and can trigger regulatory obligations even when not itself a violation of antifraud rules.
Two counterparties entered credit default swaps referencing VNU securities. When a credit event occurred the buyer failed to deliver the covered obligations on settlement. The calculation agent deducted the market price of the securities from the amount owed under the contract. The failure to deliver directly affected the cash settlement amount.
A seller's failure to deliver goods identified to a contract for sale. The buyer may recover damages measured by the difference between market price at the time the buyer learned of the breach and the contract price together with incidental and consequential damages.
Pine Stage ordered five batches of lighting rigs from Coastal Media under an installment contract. After paying for the first three batches Pine Stage repudiated the remaining obligations. Coastal Media withheld the fifth batch still at its facility. Pine Stage sued for damages measured by the difference between market price and contract price. The court applied the non-delivery damages formula to the withheld batch.
No. Naked short selling that produces a fail to deliver is not necessarily a violation and can contribute to market liquidity in some circumstances.
The buyer recovers the difference between the market price at the time the buyer learned of the breach and the contract price together with incidental and consequential damages less expenses saved.