Clients holding short stock positions are at risk of having these positions bought-in and closed out by IBKR, oftentimes with little or no advance notice. This is a risk which is inherent to short selling and generally outside the control of the client. It is also subject to regulatory rules which dictate the timeframes by which brokers must act.
While similar in their effect, the term buy-in refers to an action taken by a third party while a close-out refers to the action being taken by IBKR. These actions typically result from one of three events:
- The shares required to be delivered when a short sale settles cannot be borrowed;
- The shares which were borrowed and delivered at settlement are later recalled; or
- A failure to deliver occurs with the clearinghouse.
Find an overview of each of these Buy-in/Close-out Events and their considerations in the IBKR Knowledge Base.