9.2.7.2. Close-Out by Seller
When a seller makes a good delivery but the buying firm rejects the transaction, either because it can’t pay for it or because it doesn’t believe it was a good delivery, the seller (delivering party) has the option to close out the transaction.
Upon receiving a notice of rejection, the selling party has up to five business days to notify the buyer by telephone of its intention to close out the transaction on a specified date. The close-out date may be as early as close of business on the first business day following the date the telephonic close-out notice is given.
Immediately following the telephonic notice, the seller must send a written close-out notice, return receipt requested, containing all the usual information identifying the securities, the parties involved, and the required acceptance and close-out dates. The written notice must be accompanied by a copy of the purchaser’s confirmation of the transaction to be closed out or other written evidence of the contract between the parties.
In the event the buyer completes the transaction with the delivering party (seller) by the date and time specified in the notice of close-out, the seller will be entitled to recover from the buyer, in addition to the agreed purchase price of the securities, all actual and necessary expenses incurred by the seller due to the purchaser’s rejection of delivery.
If the delivering party executes the close-out, it may sell the securities in the secondary market at the current market price for the account and liability of the purchaser. The delivering party must notify the purchaser by telephone and in writing and forward a copy of the confirmation of the executed transaction.
Any difference between the current market price and the price on the original confirmation must be paid by the appropriate party within ten business days of the date the close-out is executed. If the market price is less than the original agreed