A trade break is an exception state where details of a securities trade do not reconcile between buyer, seller, company, and transfer agent — blocking settlement until corrected.

How it works

In public markets, breaks arise from mismatched confirms, failed DVP settlement, or corporate action errors. In venture secondaries, breaks are common: seller shares still subject to ROFR, board consent not filed, wrong certificate class, or SPV subscription docs out of sync with wire amount. Operations teams open break tickets, identify root cause, and reconfirm economics.

Private trades lack centralized clearing — counsel, company legal, and brokers manually align stock purchase agreements, cap table exports, and wire instructions. A break on a $5M secondary can delay closing weeks if company response is slow.

Founders with transfer restrictions should pre-clear process docs to reduce break rates for employee sales.

Why it matters

• Founders: Company sign-off is often the gating item; backlog creates employee frustration during liquidity windows.
• Investors: Trade breaks distort NAV timing and can breach fund deadlines for capital deployment or distributions.

Common mistake

Assuming signed LOI equals settled trade. Until break-free settlement and cap table update, no economic transfer occurred — wires may sit in escrow.

Related ideas

See also secondary sale, ROFR, transfer restrictions, and trade price.