The ‘aged-fails auction’ is a market driven initiative to improve settlement efficiency in the European fixed income markets. It is intended to provide an alternative source of liquidity for market-makers who are looking to cover short positions that are failing as a result of a lack of liquidity in the secondary bond or repo markets. The initiative is designed to connect dealers running aged-fails in specific securities to holders of those securities who are provided with the opportunity to tender the securities through a standardized auction process. Holders of relevant securities will be notified of tender interests by means of (I)CSD corporate actions messaging functionality. This will help dealers to manage their risk more effectively, and to avoid the inherent costs of failing a short-sale transaction, including the risk of being bought-in. Accordingly, it is intended that the initiative will meet the dual objectives of supporting market liquidity and improving settlement efficiency.

It is further intended that the auction process can be adapted into a ‘buy-in auction’ mechanism. This would be supported by a revision to the ICMA buy-in rules, and could also be consistent with CSDR mandatory buy-ins, when the regulation is implemented.

Presentation for the ICMA aged-fails auction initiative

The above presentation provides an overview of the projected aged-fails auction initiative, including the results of a member survey to determine the commercial viability for potential supporters of the initiative.

See also:

8 March 2016: Lexis PSL article 'Going, going, gone—ICMA launches new auction initiative for fixed income market'


Andy Hill
Senior Director, Market Practice and Regulatory Policy; secretary to the Secondary Market Practices Committee and also responsible for overseeing repo policy.
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