Securities Lending Under T+1: Recall Cutoffs, Returns, and Buy-Ins
Updated October 2026, after T+1 took effect. First published March 2024.
The first version of this post predicted that T+1 would bring more liquidity, lower counterparty risk, and cost savings to securities lending. What actually changed for lenders and borrowers is narrower and easier to pin down. When a lender sells a security that's out on loan, the shares have to come back in time to settle the sale. Under T+2 that sale settled two days after trade date. Since May 28, 2024, it settles the next day, and the recall has to start the same night.
The Recall Cutoff Moved From the Next Afternoon to Trade Date Night
The T+1 Industry Implementation Playbook, prepared for SIFMA and ICI with DTCC's support (published August 2022, last updated December 2023), set the industry's recommended timing. It recommends that lenders issue recalls by 11:59 p.m. ET on trade date. Its timeline puts the old cutoff at 3:00 p.m. ET on T+1.
| Step | Under T+2 | Under T+1 |
|---|---|---|
| Recommended recall cutoff | 3:00 p.m. ET on T+1 | 11:59 p.m. ET on T |
| Buy-in allocation, recall made by the cutoff | 3:10 p.m. ET on T+3 | 3:10 p.m. ET on T+2 |
| Regulation SHO close-out of a fail on a long sale | Start of trading on T+5 | Start of trading on T+4 |
The playbook is careful about what the 11:59 p.m. time is. It's a best practice, and it "does not supersede existing MSLAs." The legally binding recall time and the return deadline still come from the securities lending agreement between lender and borrower, and the playbook gives 3:00 p.m. ET on T+2 as an example of a later contractual return time. On the infrastructure side, DTC accepts recall messages from participants and vendors and passes them to the counterparty through its SMART/Track for Recalls service, and NSCC changed its Securities Financing Transaction service to match the new timing.
The Recall Starts When the Sale Reaches the Lending Agent
A lender can't recall shares it doesn't know it has sold. The playbook describes the gap. Where the custodian bank is also the lending agent, recalls don't begin until the trade instruction reaches the custodian. Where a third-party lending agent runs the program, it has to be instructed separately, then get the shares back into the custody account in time for delivery.
So for a fund that lends, the recall clock really starts with its own post-trade work. A sale allocated and sent to the custodian at 7 p.m. can make an 11:59 p.m. recall. One that reaches the lending agent the next morning has already missed it, and the borrower now has less than a day to return shares for a sale settling that afternoon. The U.K. has written this step into its T+1 code of conduct: its Technical Group's plan asks buy-side firms to tell lending intermediaries about sales "as soon as possible after execution." In the U.S. it's practice, not rule, which is the reason to check it.
Regulation SHO and the Long Sale of a Loaned Security
A broker-dealer that sells a customer's loaned shares has to decide whether the sale is long. In the February 2023 T+1 adopting release, the SEC said that to mark such a sale long under Rule 200(g)(1), some broker-dealers "may need to initiate a bona fide recall as early as trade date or may choose to modify securities lending agreements to shorten the recall period." It didn't change Regulation SHO or the Rule 204 close-out periods to make room. Rule 204 still gives a fail on a long sale until the start of trading on the third settlement day after settlement date, which under T+1 is T+4. Our post on Rule 204 close-outs under T+1 covers the close-out side.
What Changed for Borrowers
Borrowers lost a day. The playbook's reasoning for the trade-date recall is that it gives a borrower enough notice to try to return the shares on T+1, "often by delivering newly borrowed shares." A borrower that waits for the contractual deadline, if that deadline is T+2, can be fully within its agreement and still leave the lender's sale failing on T+1. That's why the market practice and the agreement need to say the same thing. If your agreements still carry return periods written for T+2, the 2024 change left them out of step with the recall times your desk works to.
Lending Into the U.K. and EU in 2027
The U.K. and EU move cash equities to T+1 on October 11, 2027, and both keep securities lending out of the mandate itself. The EU's amending regulation of October 8, 2025 exempts securities lending and borrowing, repos, and buy-sell backs when they're documented as single transactions composed of two linked operations. The U.K.'s draft regulations of November 20, 2025 carry a similar exemption.
The recall still has to work, because the sale it supports settles on T+1. The U.K. Technical Group report (February 2025) makes two lending items critical: automate recall processing by the end of 2026, and from October 11, 2027 align the operational deadline for next-day recalls with the close of trading on the London Stock Exchange. It also notes that vendor recall services got "a large boost" from the U.S. and Canadian moves. A U.S. lender with a U.K. or EU book will meet the same problem a second time, so the recall work from 2024 is worth reusing. More on that in our U.K. T+1 post.
What T+1 Didn't Change
Loans and borrows open longer than 30 days still need the quarterly verification in SEC Rule 17a-13(b)(3), and so do fails to receive and deliver. Quarterly Broker Statement (QBS) generates and tracks those confirmations and the responses. Loan-level reporting under SEC Rule 10c-1a doesn't start until September 28, 2028; our 10c-1a post has the current dates.
This post is for informational purposes only and does not constitute legal advice. For guidance on specific regulatory obligations, consult your counsel or compliance advisor.