T+35 Settlement Cycle

• Failure to deliver (FTD): An FTD happens when the seller fails to deliver the required shares to the buyer by the standard settlement date (T+2)
• SEC Rule 204 - Close-out Requirements provides a special exemption that gives certain market participants (like market makers or authorized participants) up to 35 calendar days to deliver securities after a sale if they are deemed to own the shares but are temporarily unable to deliver them.
  • "If delivery is not made within 35 days after the trade date, the broker-dealer that sold on behalf of the person must either borrow securities or close out the open position by purchasing securities of like kind and quantity."
• This forced buying can drive up a stock’s price

In 2023, researchers from Mendel University in Brno, Czech Republic, published a paper titled: Confirmation of T+35 Failures-To-Deliver Cycles: Evidence from GameStop Corp, which provides empirical evidence that ETF-related fails-to-deliver tied to GameStop stock formed consistent, non-random T+35 settlement cycles, suggesting systematic exploitation of regulatory exemptions by market makers.