The program is being eliminated, so there isn't a borrow program any longer, they got regulatory approval to eliminate it. The stock borrow program had nothing to do with "Short Sales", The word "short" has many meanings and can be confusing in its use in industry/regulatory speech. A short member is not executing a short sale as in a short position. This program revolves around the delivery of shares within settlement requirements of T+3 (trade date plus 3 days for settlement) meaning Fails to Deliver. If a member executes a trade for its customer and that customer fails to deliver the shares for that transaction this leaves the member short in the transaction although the trade is a long position trade.
A trade that has failed becomes a mandatory buyin at 13 days for the executing member, there also trade restrictions applied to that member along with trade rejection penalties applied. The trade rejection is 130% of the value debited against the cash account of the member until the trade has been cleared. The SBP allowed an executing member a means to avoid all of the restrictions and penalties by using other members "excess" shares to cover the short members delivery requirements until that short member could deliver its customers shares. This is no different than how banks operate.
Why would a customer fail to deliver on settlement date:
#2 deals with the inability to borrow from the SBP to cover the transaction within T+3
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