This study estimates the total value of trade settlement failures in the US bond markets. Analyzing data from multiple sources, it shows that the value of settlement failures is rising. Regulatory and market efforts to reduce the problem have been largely unsuccessful. In April 2008, fails to deliver in bond markets reached a peak value of $600 bn, a fail rate of nearly 9%. The resulting loss of tax revenue on payments in lieu of interest (on tax-exempt municipal and Treasury securities) is found to be $42 mn per year to the federal government and $271 mn per year to the states. The loss of use of funds to investors as a result of securities paid for but not received is found to be $7 bn per year.
