Trading with unsettled cash

Help 👋
1

Hello freetrade community!

As far as I know, I can trade unsettled cash and unsettled funds, so I want to ask you a question regarding settlement fail.

Let’s imagine the following situation:
I only have 100 ABC shares worth £ 100 in my account. Monday morning I sell all my shares and buy 100 XYZ shares for £ 80 at lunchtime. However, on Wednesday it turns out that on my first trade (ABC sale) there was a settlement fail and I still have these shares in my account, but there is no money to pay for 100 XYZ shares.

What happens then?
What will need to be done on my side?
What actions will you take to solve this problem?

Thanks in advance!

2

Can settlements fail? I’ve personally never heard of this happening. The fact we can trade with unsettled cash feels like it can’t happen.

3

Yes, settlement can fail. Probability of fail is about 7%.
For more info here Table 1.

4

“In reality, at least in the UK, fails usually occur because the seller did not deliver the
security, while fails due to lack of cash can occur but are very rare.”

I don’t believe 7% of sales executed on FT fail to settle. If that was the case we would have heard about it happening on the forum - which I can’t recall happening…at least in the last 12 months.

Maybe someone from FT could clarify?