Steven.Davis
Registered: Jun 2010
Posts: 307 |
03-04-12 04:53 PM
+1 to the answers above.
I also want to clarify that it isn't up to you personally to deliver the borrowed shares on T+3. There is a whole middle-office process about inventory and delivery instructions. I assume that we are talking about US stocks (other countries have variations from this paradigm.) If you don't want your prime to close your account, T+1 is about as late as you can secure your borrow (with T+2 delivery.) Doing a locate on T+3 isn't going to do anything. The prime needs to negotiate with a counterparty, match settlement instructions (remember these have collateral), settle the borrow delivery-for-payment, match settlement instructions on your short/sell, and settle the sell delivery-for-payment.
The question seems a bit odd anyhow. You shouldn't be paying for the borrow (haircut on the collateral interest) until T+2. Even if you cover and short on T+1, it doesn't matter to the prime. The short will still settle before the cover, and they will maintain a standing borrow to support your flickering position.
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