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April 30, 2024
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Not in PB myself, but buy ins happen all the time across desks. The easiest version is that you are short and can't deliver to the customer you short sold to, so the customer will issue you with a buy in notice, meaning if you don't cover your short and deliver, an agent (e.g. Euroclear) will be appointed to cover your short (guaranteed delivery) for you which might be quite costly. In PB i think it can get a little more complex.
Scenario 1: Hedge Fund shorts Bond A to Bank B Hedge Fund is PB customer of Bank C PB of Bank C fails to lend the hedge fund the bonds and maintain their short Hedge Fund fails in delivering to Bank B Bank B issues buy in to Hedge Fund Hedge Fund passes on Buy in to PB of Bank C
This step: "PB of Bank C fails to lend the hedge fund the bonds and maintain their short" is a whole can of worms potentially involving a repo desk at Bank D and buy ins from 2 clients sides... .
Would be interesting to hear someone from PB on this one.
Thanks, I am in PB PC, started about a month ago. Trying to understand what happened with the desk yesterday. Basically i think some our clients almost got bought-in so we are able to lend some securities at rates 3fold their normal cost. Does that sound right?
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