Group Seeks More Flex in Buy-In Rule

The Bond Market Association has asked the Treasury to make its buy-in rule more flexible so that dealers can better manage the risk of failed customer sell orders in the mortgage-backed security and Treasury markets, particularly when fails are widespread.The association said it believes the rule, "as currently written, can potentially inhibit a prompt clean-up of unsettled transactions in agency MBS and Treasury securities when failed transactions in a particular security have become endemic due to short supply." The bond market group said it has recommended that the rule "be suspended for certain specific securities in endemic fail situations since attempts to buy-in a failing counterparty under such conditions could exacerbate the problem." The association can be found on the Web at http://www.bondmarkets.com.