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Types and Procedures for Buy-Ins


Learn about the three general categories that buy-in activity falls into and how each type of buy-in is processed by Place Trade (PT) through the information below:

Buy-in Procedure for Short Sale Transactions

The following procedure relates to short sale transactions that fail to settle on the normal (T+3) settlement date. PT's implementation of the SEC regulations is as follows:


1. At about 17:00, PT will reconcile any late settlements as well as client transactions up to the end of the regular trading session at 16:00 EST. PT will consider the net of all trades on the day when determining the position, including any new short sales. Trades after 16:00 will not be included in our position reconciliation. PT will then calculate the expected buy-in requirement based on complete information. PT applies, on a best efforts basis, last in, first out (LIFO) logic when determining buy-in allocations.

2. On the morning of the next business day (generally the fourth day after trade date, also called "T+4"), and prior to the start of trading, PT will make a final attempt to locate and borrow the required securities. In the event we are able to do so, PT will send a notification reporting on any late borrow activity. The notification will confirm positions to be bought in.

3. PT will attempt to post the bookings prior to the start of trading at 09:30. Occasionally, it may take longer to correct the positions visible via the TWS but the adjustments will be visible in the trades' window so it should be evident to clients for whom this real-time information is important.

4. By no later than the beginning of regular trading hours on T+4, PT will execute transactions in the open market to affect the actual buy-in, as required by the SEC rules. In case the buy-in transactions occur at multiple prices, we will calculate the volume weighted average price for the buy-ins.

5. On the statement of the 4th day, PT will book the buy-in trades with the code B.


PT Short Stock Buy-in Procedures

After a stock borrow transaction has been concluded, the lender of a security retains the right to request the return of the lent stock. When a stock is recalled, PT will attempt to find alternative lenders to replace the borrow transaction. If replacement is not possible, and PT fails to return the recalled stock, the lender has the right to issue a formal recall demand which allows for the execution of a buy-in 3 days after issuance should PT fail to return the recalled stock. Note that the issuance of a formal recall demand (a) allows, but does not require, the lender to execute a buy-in, and (b) is generally an automated process; the actual frequency of buy-ins is a small proportion of the recall demands. Due to this, PT does not provide advance warning to clients with respect to the issuance of a formal recall demand.

In the event that a buy-in is actually executed by a lender, PT does not handle the execution. Instead, the lending counterparty will affect the buy-in in the open market and present PT with the execution prices. The buy-in is allocated to client accounts based on a settled short stock position; therefore unsettled trades will not be considered when determining liability.

PT will try to report these buy-in transactions to clients as quickly as possible through the trades' window of the TWS. As such, the account will generally be updated prior to the account receiving notification which will occur at approximately 17:30 EST.


Regulation SHO Rule 204 Buy-in Procedures

If PT has a fail to deliver position at a registered clearing agency due to a customer sale, PT must immediately purchase or borrow securities to close out the fail to deliver position by no later than the beginning of regular trading hours on the settlement day following the day that the fail to deliver position occurred. In the event that PT cannot borrow sufficient securities to make delivery to a contra-party on such a transaction, PT will place a market order, marketable limit order, or Variable Weighted Average Price (VWAP) order to buy in such position in an attempt to provide the best possible fill price for its customers and still remain in compliance with US requirements to close-out open fails.

Clients should be aware that based on the manner in which PT is required to execute buy-in transactions; the potential exists for a significant difference in the price between a buy-in execution and the prior day's closing price particularly in the event a buy-in transaction is in an illiquid security. Clients should be aware of such potential and manage any potential risk to their portfolios.


Learn about Short Sales

What is a Short Sale?
Short Stock Buy-in Procedures
Exceptional Short Sale Regulations 
Regulation SHO
Securities Available to Short

How to Borrow & Lend 
Borrow & Lend Examples




All investing involves risk, including the possible loss of principal and there can be no assurance that any investment strategy will be successful.