BoE paper looks at how to halt ‘cascade’ of settlement fails
“Buy-in” process could help to avoid system-wide “gridlock”, but design is challenging
A “buy-in” mechanism could help to avoid cascading settlement fails that lead to “gridlock” in financial markets, a Bank of England working paper says.
In a buy-in, a third party can step in when a fail persists over a certain period of time, providing the buyer with the securities they were seeking to obtain. Any price differential is settled later between participants.
In the paper, Pedro Gurrola-Perez, Jieshuang He and Gary Harper say this can help avoid a cascading series of fails, but the
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