Legal Definitions - backadation

Definition: Backadation is a term used in securities trading that refers to a fee paid by the seller of securities to the buyer to allow delivery after the original delivery date. It is also known as backwardation or inverted market.

Example: Suppose a seller has agreed to deliver a certain number of securities to a buyer on a specific date. However, due to unforeseen circumstances, the seller is unable to deliver the securities on the agreed-upon date. In this case, the seller may offer to pay a fee to the buyer to allow delivery after the original delivery date. This fee is known as backadation.

Explanation: The example illustrates how backadation works in securities trading. When a seller is unable to deliver securities on the agreed-upon date, they may offer to pay a fee to the buyer to extend the delivery date. This fee compensates the buyer for the delay in delivery and allows the seller to fulfill their obligation at a later date.