Cash Implications of Maturing a Short
About AFS

Mature Short Cash

Q: If we short sell a security in afs, what is the impact to cash...if the security matures the following day, what happens?

A:  From a cash perspective, the system does the right thing; i.e., it subtracts from the cash balance rather than adding to it (because you owe the maturity value of the security, plus the final interest payment, to the other party). From a logistical perspective, allowing a short to mature is not a great idea. It implies that you never covered the position, and now you never will, thereby creating a fail that will never resolve.