Paper: Canaries in the Coal Mine: How the Rise in Settlement ‘Fails’ Creates Systemic Risk for Financial Firms and Investors

Paper

Canaries in the Coal Mine: How the Rise in Settlement ‘Fails’ Creates Systemic Risk for Financial Firms and Investors

Harold S. Bradley, Robert A. Fawls, Robert E. Litan

Kauffman Foundation, 2 March 2011

Our central conclusion is this: Every fail introduces a cumulative and potentially compounding liquidity risk into the orderly process of settling the $7.5 trillion of security transactions completed each day, which could be especially dangerous during times when financial institutions are short of liquidity (as was true during the financial crisis of 2008).

PDF (18 Pages):  Kauffman Canaries in the Coal Mine