Failure to Deliver (FTD)

A failure to deliver happens when the seller of a security does not hand over the shares by the settlement date — under the US T+1 cycle, one business day after the trade. The buyer paid, the shares never arrived, and the trade sits unsettled on the books of the clearing system.

Most FTDs are plumbing: processing errors, a borrowed share recalled at the wrong moment, an ETF create/redeem timing gap. The regulatory concern is naked short selling — shorting without borrowing — which Regulation SHO polices with a close-out requirement: persistent fails must be bought in.

A stock joins the Reg SHO threshold list when fails total at least 10,000 shares and 0.5% of shares outstanding for five consecutive settlement days. The SEC publishes FTD data for every security twice a month, and traders scan it for names where fails are piling up alongside high short interest.