Fail to Deliver is an event where the broker on the sell side of the transaction fails to deliver the security.
Applying "Fail to Deliver" to Securities Exams:
All securities transactions must be settled with the delivery of the physical securities if the securities are issued in physical form. When the selling broker dealer fails to deliver the securities to the buying broker dealer the selling broker dealer has an open fail to deliver. If the issue is not resolved the buying broker dealer may buy in the securities to close the open buying broker dealer’s fail to receive and charge the selling broker dealer (who failed to deliver the securities ) any difference.