Failure-to-Deliver / Continuous Net Settlement (CNS)
Idea
A description of how the US stock-clearing system can generate 'phantom' shares: short sellers who never deliver the shares they sold create persistent delivery failures that synthetically inflate the apparent supply of a stock, and the true scale is deliberately opaque because the clearing data is classified as proprietary by an organization owned by its own member banks. Documented by named researchers and official failure-to-deliver data, but unresolvable in magnitude with current public disclosure.
The engine's definition — word for word
DTCC's Continuous Net Settlement system permits the generation of 'phantom' or synthetic shares via persistent Failure-to-Deliver (FTD) cycles, ex-clearing arrangements, and total-return swap derivative exposure. Naked short selling (executing short sales without legitimate pre-borrow) produces FTDs that synthetically dilute the reported float. The exact magnitude of synthetic shares at any given moment is deliberately opaque — classified as proprietary clearing data by the DTCC, which is an SRO owned by its member banks. Documented by Dr. Susanne Trimbath ('Naked, Short and Greedy'), Wes Christian forensic work, and SEC aggregate FTD data. Quantitatively unresolvable with current public disclosure. See Divergence: FTD / Synthetic Share Data. [Seam: Aligned-To-Whom? codified-exemption instance of the perception/reality seam (Aligned-To-Whom?). (b)+(c).]
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