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Buy-in: Difference between revisions
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{{a|contract|}}{{d|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. | {{a|contract|}}{{d|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. | 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. | ||
Likely points for dispute, not really well managed by the legal documentation, but left down to the commercial expedient of getting on the phone and sorting it out as a way of managing the ongoing relationship — any single buy-in opportunity more than likely to be drowned out by the normal revenue one can expect to make from an ongoing fruitful relationship with a counterparty one ''hasn't'' needlessly cheesed off — include (i) a Buy-in happening too quickly — as per the CDSR conventions, it is normal to wait 4 or 5 buisness days to let normal wrinkles in the settlement chain sort themselves out — and a buy-in happening at an off-market price: Since the Non-Defaulting Party can pass on its costs of buying in, it is less incentivised than it normally is to get the best possible price, and in a market which is Q.E.D. already sticky — otherwise, why the need for a buy in? — it is likely there will be some shoddy prices going. | |||
Happened quiet a lot, for example, during the early months of the Russian crisis. | |||
=== [[Central Securities Depositary Regulation]] mandatory buy-ins === | === [[Central Securities Depositary Regulation]] mandatory buy-ins === | ||
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*[[Securities financing transaction]] | *[[Securities financing transaction]] | ||
*{{gmslaprov|Buy-in}} under the {{gmsla}} | *{{gmslaprov|Buy-in}} under the {{gmsla}} | ||
*{{gmraprov|Buy-in}} under the {{gmra}} | |||
{{ref}} | {{ref}} | ||