The curve that we have derived in the previous section is amenable to analytical integration, a process equivalent to numerical summation but much more convenient. The above integral has to be multiplied by 2 since the x-scale was in coded fail day units and then multiplied by 4/7 since the days were calendar days and there were only 4 trade days per 7 calendar days at the time our Survey 1 data were being collected. The final results are that the average percentage of daily dollar trade volume in fail on an arbitrary day in August or September 1968 was: 134.1% for the NYSE 387.3% for the ASE 818.4% for the OTC market. 5. Estimation of the total dollar amount in fail on an arbitrary day. By applying the percentages found in the previous section to the average daily dollar volume, we derive an estimate of the dollar amounts in fail-to-receive. We used two different estimates of the 1968 average daily volume, one based on 250 trading days per year and one based on 224 trading days. See Table D-6. D-7. The corresponding estimates of the dollar amounts in fail are shown in Table Combining the figures of Tables D-6 and D-7 we arrive at the estimate that on an arbitrary day for the NYSE approximately 1.3 days worth of daily volume is in fail, for the ASE approximately 3.9 days worth, and for the OTC market approximately 8.2 days worth. 1 APPENDIX FF A SECURITIES HANDLING SYSTEM FOR THE 1975 ERA Report to NEW YORK STOCK EXCHANGE C-71467 November 1969 SUMMARY The primary problems of the securities industry today arise from its labor intensiveness and its lack of system-wide control and audit information. The causes of these difficulties are the heavy reliance on paper for establishing and transferring records of ownership and the compartmentalization of activities within the industry. The problems become most visible in the large numbers of broker-to-broker Fails and the slow, expensive delivery of certificates to customers. Our proposed approach for solving these problems involves the development of a system of depositories, within which ownership records can be transferred by electronic bookkeeping entries. Associated with the depository system should be a nation-wide wire system to effect bank deliveries to customers - particularly institutional customers and a centralized information and control unit. The overall securities handling system can be organized best in terms of three components or modules: This organization will permit other markets to participate in an NYSE Broker component, if desirable, or to develop their own procedures if interfacing through the Custodian is preferable. |