New EU buy-in rule will raise corporate funding costs, says study

London

A EUROPEAN Union crackdown against failed trades on capital markets risks adding "several billions of euros" to companies' and governments' funding costs annually, a group representing banks and asset managers said.

A new EU law would oblige trading venues or disappointed buyers to appoint a third party to rescue a failed trade, passing costs on to the seller. The measure, known as mandatory buy-in, would prompt dealers to double the gap between the prices at which they will buy or sell the most-liquid government bonds, while corporate bond markets risk drying up completely, according to a study by the International Capital Market Association published on Monday.