Settlement Failures and Close-Out Procedures

What this video covers

• Why a fail to deliver or fail to receive does not cancel the trade, and why the contract remains binding
• The buy-in timeline: earliest execution 3 business days after due date, written notice by 12:00 PM ET at least 2 business days before execution, and close-out deadline of 10 business days
• Cost allocation in a buy-in: the failing seller pays the difference when replacement shares cost more than the original contract price
• How a sell-out mirrors the buy-in process, triggered by buyer failure to pay with the failing buyer liable for any loss
• What a don't-know (DK) notice represents: a trade comparison dispute, not a settlement failure, with potential cancellation or arbitration if unresolved
• Regulation T payment deadlines: T+1 due date with outside limit of T+3, extension requests filed with a self-regulatory organization (SRO), and mandatory liquidation if payment is not received
• The 90-day account freeze: trading is still permitted but only with cash deposited in advance of the order, and its connection to freeriding violations