Close-out rate
Trading & ordersThe formula price at which a failed delivery is settled in cash when the auction finds no seller — the higher of the highest traded price from the trade day to the auction day, and the auction-day closing price plus 20%.
In plain terms
Written to sit above the market so that failing to deliver is never the cheaper option. In an illiquid stock, where auctions most often find nobody, the penal 20% is usually the binding term.