Buy-In
A buy-in is the forced purchase of shares to close a short position or settle a failed delivery, made by a broker or clearing firm, often without the account holder’s consent and at the prevailing market price.
A buy-in is a forced purchase of shares to close a short position or settle a delivery that failed. It is made by the broker or clearing firm, usually at the market price and without asking the account holder. Rules differ by country and market.
- Category
- Market Structure
- Reading time
- 3 min
- Also called
- Forced buy-in, Close-out purchase
- Updated
A buy-in in plain words
Under FINRA Rule 11810, if a seller fails to deliver, the buyer may close the contract — but not before the third business day after delivery was due.1
Under Regulation SHO's Rule 204, clearing brokers must act to close out positions that failed to deliver.2
Closing out means buying or borrowing the same shares in the same amount, and the cost is often passed on to the short seller.2
How a buy-in happens
A delivery fails
The seller does not deliver shares when delivery is due.
Deadline passes
The buyer can start a buy-in from the third business day after the missed delivery date.1
Close-out is required
The clearing broker must take steps to close out the fail.2
Shares are bought
It does so by buying or borrowing matching shares.2
Costs are allocated
The account that caused the fail usually pays.
Position is closed
The short is gone, often at a bad price.
Worked examples
Example 1 — Short squeezed by a buy-in
−1,200A trader is short 200 hypothetical shares sold at 20. Shares are bought in at 26.
| Loss per share | −6 |
| Total | −1,200 |
The broker bought the missing shares at the market price, whatever it happened to be.2
Example 2 — Hard-to-borrow stock
Forced closeA hypothetical lender recalls shares; no replacement can be borrowed.
| Result | Buy-in |
Because the fail dragged on, the broker was obliged to close it out.2
Example 3 — Persistent fail
Mandatory close-outA hypothetical fail stays open for 13 settlement days in a non-reporting threshold security.
| Days | 13 |
For certain threshold securities, a fail that lasts 13 settlement days in a row must be closed out right away.3
Buy-in vs margin call liquidation
| Aspect | Buy-in | Margin call liquidation |
|---|---|---|
| Trigger | Failed delivery or recalled loan | Insufficient equity |
| Action | Shares are bought | Positions are sold or bought back |
| Notice | Often little or none | Usually a call first |
| Who acts | Broker or clearing firm | Broker |
Where buy-ins matter
Short selling
Risk of every Short Selling position.
Squeezes
Buy-ins can fuel a Short Squeeze.
Settlement
Linked to Settlement failures.
Crowded shorts
High Short Interest raises borrow risk.
Advantages and disadvantages
Advantages
- Protects buyers who did not receive shares.
- Keeps settlement reliable.
- Limits abusive naked short selling.
Disadvantages
- Can happen without consent.
- Executes at the market price, which may be high.
- Can trigger large losses for short sellers.
- Rules differ by country and market.
Going deeper
Read as far as you need. Each level builds on the one before it.
Timing
Beginner
Rule 11810 gives the buyer the right to close the trade from the third business day after delivery was due.1
Regulation SHO
Intermediate
Rule 204 puts the duty to close out failed deliveries on clearing-firm brokers.2
Persistent fails
Advanced
FINRA Rule 4320 adds a hard deadline: a fail in a non-reporting threshold security that lasts 13 straight settlement days must be closed out immediately.3
Common mistakes
Ignoring borrow risk
Hard-to-borrow stocks can be recalled.
Shorting crowded names
Buy-ins and squeezes cluster.
No stop on shorts
Losses are uncapped.
Assuming notice
Buy-ins may come without warning.
Check your understanding
Test yourself before moving on. Each answer comes with an explanation.
Key points to remember
- A buy-in is a forced purchase.
- It follows a failed delivery or recalled borrow.
- It can happen without your consent.
- Short sellers bear the cost.
- Rules differ by country and market.
Frequently asked questions
Can I stop a buy-in?
Who pays for a buy-in?
Are buy-in rules the same in Europe?
Further learning
- Short Selling
How short selling works.
- Short Squeeze
When shorts rush to cover.
- Settlement
When trades must deliver.
- Margin Call
Another forced close.
Sources
This article is written in our own words. The sources below support the specific facts, rules and figures marked with a number in the text. Links open the original publisher’s page.
- FINRA. Rule 11810. Buy-In Procedures and Requirements (opens in a new tab) Checked .
- U.S. Securities and Exchange Commission. Key Points About Regulation SHO (opens in a new tab) Checked .
- FINRA. Rule 4320. Short Sale Delivery Requirements (opens in a new tab) Checked .
Educational content, not financial advice. Examples use hypothetical prices and simplified costs; actual fees, margin rules and regulations vary by broker, market and country. We are not affiliated with any publisher linked above. Last reviewed . Report an error or request a source credit.