Trade Settlement Failures in US Bond Markets

The IUP Journal of Financial Economics, Vol. IX, No. 1, pp. 53-78, March 2011

Posted: 25 Jul 2011

See all articles by Susanne Trimbath

Susanne Trimbath

STP Advisory Services, LLC; Creighton University, Department of Finance and Economics; Bellevue University - College of Business

Date Written: July 25, 2011

Abstract

This study estimates the total value of trade settlement failures in the US bond markets. Analyzing data from multiple sources, it shows that the value of settlement failures is rising. Regulatory and market efforts to reduce the problem have been largely unsuccessful. In April 2008, fails to deliver in bond markets reached a peak value of $600 billion, a fail rate of nearly 9%. The resulting loss of tax revenue on payments in lieu of interest (on tax-exempt municipal and Treasury securities) is found to be $42 million per year to the federal government and $271 million per year to the states. The loss of use of funds to investors as a result of securities paid for but not received is found to be $7 billion per year.

Suggested Citation

Trimbath, Susanne, Trade Settlement Failures in US Bond Markets (July 25, 2011). The IUP Journal of Financial Economics, Vol. IX, No. 1, pp. 53-78, March 2011, Available at SSRN: https://ssrn.com/abstract=1894611

Susanne Trimbath (Contact Author)

STP Advisory Services, LLC ( email )

PO Box 1252
Bellevue, NE 68005
United States
4029328888 (Phone)

HOME PAGE: http://www.STPAdvisors.com

Creighton University, Department of Finance and Economics ( email )

United States

Bellevue University - College of Business ( email )

United States

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