Investment Education PLC

Fundamentals of Fails Management
Last Updated - 23 June 2010
Todays Date -
Return to CoursePrint course
Duration 1 day
Available as an in-house course. Details on request.



Failed Trade Settlement is very expensive in terms of Penalties, extra working time needed to resolve a situation and possible loss of reputation. It also erodes a good client relationship. It is not really surprising that clients give their highest ratings to some of the most expensive Custodians, Brokers and Banks. Cheap is often dear and dear is often cheap!  


Regulators are now also paying far more attention to Fails Management in assessing a companys safety, security, and hence regulatory capital as required under Basle 2. Recent events have also made Regulators far tougher and less forgiving to subjects shortcomings and lapses.


This effective one day course highlights the cost of failed securities (equities and bonds) trades and analyses their causes.  Preventive measures are described and detailed. It is a very useful course for those with little or no experience or those requiring an overview.  




The course is suitable for:

  • existing staff who have limited exposure to failed trades and require a greater understanding of the relationship between their work and failed trades
  • team leaders and management, to increase their awareness of failed trades management 

Participants will be from Asset Managers, Banks, Brokers, Custodians, Fund Managers, Hedge Funds, Insurance and Life Assurance companies as well as Government Regulators. The course is applicable in any country active in the Securities business.


Participants need  to have at least 6 months work experience in or with  Back Office Operations or Custody areas (eg areas connecting to the Back Office or Operations) and to have both a basic Securities and Settlements knowledge or experience. 




Failed Trades - Overview


Introduction to failed trades, including definition, overview of impact, and linking to the trade lifecycle. 


Trade Lifecycle - Overview


The primary components of the securities trade lifecycle (to ensure all attendees have a similar understanding) highlighting the point at which fails occur. 


Impact of Failed Trades


The positive & negative impact.

The functions and business attributes that are affected by failed trades, including:


-Interest on cash 

-Client relationships

-Corporate Actions 



-Capital adequacy (Basle II) 

-Financial statements 


Identifying Failed Trades


Methods by which fails are highlighted to an organisation by its Custodians and CSDs. 


Causes of Failed Trades


Identifies the various causes of fails, including:


-non-matching settlement instructions 

-seller having insufficient securities 

-securities in different location 


Prevention of Failed Trades


Pinpoints the operation & trading actions that maximise possibility of settling trades on their due date including:    


-working within deadlines    

-resolution of non matching instructions   

-securities realignment  

-securities borrowing   

-cash and collateral management


Additionally covers the advantages/disadvantages of partial settlement, free of payment settlement and use of statistics to minimise potential fails. 


Enforcing Trade Settlement


Describes the ultimate course of action to force a counterparty to settle a trade. 


Interest Claims


Identifies the circumstances under which lost cash interest is (and is not) recoverable from counterparties, including cash calculations, claiming procedure and internal monitoring of unpaid claims.