What does failure to deliver mean?

Failure to deliver (FTD) refers to not being able to meet one's trading obligations. In the case of buyers, it means not having the cash; in the case of sellers, it means not having the goods. The reckoning of these obligations occurs at trade settlement. Failure to deliver can occur in derivatives contracts or when selling short naked.

What is failure to deliver in trading?

Failure to deliver (FTD) is a situation in trading contracts where one party fails to fulfill their obligation, whether as a buyer unable to provide cash or a seller without the necessary assets. Why does failure to deliver occur?

What happens if you fail to deliver a contract?

Failure to deliver can trigger a series of cascading problems, affecting both equity and derivative markets. In the case of forward contracts, a failure to deliver by the party with a short position can disrupt the business operations of the party with a long position, especially when substantial volumes of pertinent assets are involved.