Buy-in

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Buy-in
/baɪ ɪn/ (n.)

A self-help remedy in the securities markets where a market counterparty is unable to perform its obligations to deliver securities under an existing transaction, such as a securities sale or a stock loan. Since the selliung counterparty is failing to pony up what it owes — and by the way this may not be the counterparty’s fault: it may be the wrong end of an upstream fail, or there may be a general market dislocation — the buyer takes matters into its own hands and “buys in” from another source to satisfy its own requirements.

This has two consequences: firstly — assuming the buy in settles — the buyer no-longer needs the securities it originally bought from the failing seller. So the failing seller is stuck with these. Secondly, the price at which the buyer executes the buy-in transaction will almost certainly differ from price agreed for the original failed trade. The buyer can pass its loss on to the failing seller.

Central Securities Depositary Regulation mandatory buy-ins

Under the CSDR a mandatory buy-in process starts automatically 4 business days after the originally intended settlement date (for liquid equities) and 7 business days for other equity and debt securities. Where a buy-in isn’t possible, there is a cash compensation.

See also

• Securities financing transaction
• Buy-in under the 2010 GMSLA
• Buy-in under the Global Master Repurchase Agreement