Definition
Partial delivery refers to the situation where a broker or a party involved in a financial transaction delivers less than the full amount of a security or commodity as required by a contract. This can occur in various markets, including stock, commodities, and derivatives markets, and might happen due to a variety of reasons such as insufficient inventory, logistical issues, or errors in processing.
Examples
Stock Market Example: A trader sells 10,000 shares of a company’s stock, but is only able to deliver 7,000 shares due to an inventory shortfall. The remaining 3,000 shares constitute the partial delivery gap.
Commodity Market Example: A contract requires the delivery of 500 barrels of oil, but the supplier delivers only 450 barrels because of transportation delays or shortfall in production. The supplier has thus made a partial delivery.
Frequently Asked Questions (FAQ)
What are the implications of partial delivery?
Partial delivery can create issues such as breach of contract, financial losses, and legal disputes. The affected party might seek compensation or specific performance through legal means.
How is partial delivery addressed in contracts?
Contracts generally stipulate the remedies and procedures to handle partial delivery, including penalties, requirements for remedying the shortfall, and potential legal actions.
What is the difference between partial delivery and good delivery?
Good delivery ensures the full and proper delivery of securities or commodities as per the contract, whereas partial delivery refers to a shortfall in the delivered amount.
Related Terms
Good Delivery
Good delivery refers to the proper and complete delivery of securities or commodities as specified in a financial contract, meeting all stipulated standards and regulations.
Failure to Deliver
when the seller in a transaction does not deliver the security or commodity by the settlement date.
Settlement Date
The date by which a buyer must pay for the securities or the seller must deliver the securities, usually a few days after the trade date.
Online Resources and References
Suggested Books for Further Studies
- “Securities Market Issues” by Mosaid Al-Jafari
- “Commodities and Commodity Derivatives: Modelling and Pricing for Agriculturals, Metals and Energy” by Hélyette Geman
- “Financial Markets and Institutions” by Frederic S. Mishkin and Stanley G. Eakins
Fundamentals of Partial Delivery: Finance Basics Quiz
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