Series 24: Closing Out A Position: Buy-ins And Sellouts

Closing Out a Position: Buy-ins and Sellouts

Sometimes a seller will fail to deliver securities by the settlement date. When this happens the seller is given three additional business days before the buying firm is allowed to close out the position– allowing the selling firm an extended settlement date of up to five business days after the trade (T + 5). If delivery has still not been made, the buyer may close out his/her position by purchasing the securities in the open market. This type of close-out is called a buy-in. The original seller will be responsible for any difference in price, if the new shares prove more expensive than the original shares. The buying broker must provide written notice of the proposed buy-in to the selling member no later than noon, two business days before executing the buy-in