Cash compensation, in post-trade processing, is a payment of money made to a buyer or other receiving party when the securities owed to it cannot be delivered, so that it is left in the same economic position as if the trade had settled. It arises most clearly at the end of a failed buy-in procedure: if the securities cannot be bought in the market, the failing seller pays the difference between the current market value of the securities and the originally agreed settlement amount, and the trade is closed.
The mechanism appears in the rules of exchanges and clearing houses, in standard market agreements and in the European Union's settlement discipline regime. It is distinct from a settlement penalty, which is a daily charge for late settlement, and from a market claim, which redirects a dividend or coupon paid to the wrong party. Handling these cases is part of settlement fail management.