This February the Securities and Exchange Commission (SEC) confirmed that May 2024 is the deadline for shortening settlement times to T+1, with securities lending as one of the sectors most impacted. EquiLend, the securities lending provider that processes $2.8 trillion in monthly transactions, is developing a distributed ledger solution, 1Source, that addresses the heart of the challenge. It was initiated before the SEC deadline was set, so its primary objective is to remove reconciliations.
The difficulty with the T+1 transition is when someone sells a security that was lent out. The lending agent either has to use stock from a different client (reallocate it), or recall the security from the borrower. If the securities don’t get returned in time this could result in more trade fails.
EquiLend’s Gary Klahr noted the concern at a recent conference was “How are we going to get out the information for recall quickly enough?” He believes he has the answer: DLT. If the data is on a shared ledger, then the parties simply need to check the ledger.
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