Stuffing takes place when a broker loses a price or makes an erroneous price quotation, and he is being obliged by the aggressor dealer to still honor and complete the missed deal. Usually, the price to cover is worse than the price lost; hence, cost is shouldered by the broker who got stuffed.
a. Dealers and brokers should avoid/prevent the occurrence of “stuffing” and be aware of the market’s standard on the issue, i.e. broker stuffed deals shall be transacted and booked at the price where broker was able to cover and the difference in amount between the “stuffed” price and the cover price shall be settled via Manager’s check.
b. Where an incidence of stuffing has taken place, the broker shall contact and inform the immediate supervisor of the concerned dealer.
c. Where there are differences in amounts to be settled between the FI and the broker, this will be settled via a check payment issued by the broker in favor of the FI involved in the stuffing. The FI MUST accept the check payment from the broker.
The broker shall have a record of all the stuffing incidences. The record shall include the following details at the minimum: 1) Name of the dealer and stuffing bank; 2) Name of broker person involved: 3) transaction details; 4) reason for the stuffing; and, 5) resolution done or agreed upon by parties involved. This record shall be maintained for at least 12 months. An official report of the incident shall be sent by the broker to the Head of Treasury and/or the President of the FI involved.