2. On the stock exchange, a sum of money paid by a bear to a bull for the right to delay delivery of securities sold forward at a fixed price. A bear will have sold securities to a bull for delivery on a certain date in the expectation that, by that date, the market price will have fallen. If they do not, in fact, he may consider it worthwhile to pay a backwardation so as to defer delivery of the shares until the next account period.
|Reference: The Penguin Business Dictionary, 3rd edt.|