Securities Lending

What this video covers

• How securities lending works: a lender posts collateral in exchange for loaning shares to a borrower, typically a broker-dealer or hedge fund
• Why a hard-to-borrow label alone does not require a pre-borrow, and when the standard Regulation SHO locate requirement still applies
• The fail-to-deliver (FTD) closeout deadlines: T+2 for short sale fails, T+4 for long sale and bona fide market-maker fails, and 35 consecutive calendar days for restricted-delivery fails
• Why a restricted-delivery fail must be closed out by purchasing like securities, not by borrowing them
• What triggers the penalty box: missing an FTD closeout deadline forces a pre-borrow instead of a locate, and the restriction applies to the clearing participant and every broker-dealer for which it clears
• What makes a closeout a sham transaction: purchasing or borrowing when the participant knows or has reason to know the securities will not actually be delivered
• The threshold security criteria: 10,000 shares, $50,000 in value, and five consecutive settlement days of aggregate fails to deliver, plus the 13-day mandatory buy-in for clearing agency participants