5.11.1.1. Close-Outs of Long and Short Sales
Rule 204 specifies how long a seller has to complete a close-out when it fails to deliver by T + 2. If it is a short sale (meaning that the seller was supposed to have borrowed the securities in a timely manner), Rule 204 requires the seller to buy or borrow equivalent securities wherever it can and deliver them on T + 3.
In the case of a long sale, the seller has until T + 5 to deliver the securities. To see why this deadline is more lenient than the one for short sales, remember that the seller may be considered to “own” the securities even if the securities are not yet in the seller’s possession. For example, the seller ma