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Hard-To-Borrow List
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Source: Hard-To-Borrow List Definition (investopedia.com) STOCK TRADING, STOCK TRADING STRATEGY & EDUCATION
By GORDON SCOTT, Updated April 21, 2022, Reviewed by SOMER ANDERSON
Source: Hard-To-Borrow List Definition (investopedia.com) STOCK TRADING, STOCK TRADING STRATEGY & EDUCATION
By GORDON SCOTT, Updated April 21, 2022, Reviewed by SOMER ANDERSON
What Is a Hard-To-Borrow List?
A hard-to-borrow list is an inventory record used by brokerages to indicate what stocks are difficult to borrow for short sale transactions. A brokerage firm's hard-to-borrow list provides an up-to-date catalog of stocks that cannot easily be borrowed for use as a short sale.
The hard-to-borrow list can be compared with a brokerage's easy-to-borrow list.
KEY TAKEAWAYS
Brokerages have a variety of ways to provide access to shares that can be sold short. However, regardless of their methods, there is a finite number of shares available for shorting. Once the number of shares available has come close to running out, the broker will publish a notation of some kind on their platform. This alerts account holders that if they attempt to sell that security short, their trade order may be refused.
Short supply isn't the only reason why a security may be on the hard-to-borrow list. It may also be included because of high volatility or something else.
To enter a short sale, a brokerage client must first borrow the shares from their broker. To provide the shares, the broker can use its own inventory or borrow from the margin account of another client or another brokerage firm. The borrower (i.e., the short seller) must pay interest and fees on the borrowed shares. Those on the hard-to-borrow list can have higher stock loan fees as a result of being in shorter supply.
Investors who enter short sale transactions attempt to capture profits in a declining market. For example, an investor may think that shares in Apple are likely to drop in price. The investor can short sell the stock and, if the price falls as they anticipate, repurchase it back for a profit. If the stock rises, however, the investor loses money.
Hard-to-Borrow List RequirementsBrokerage firms update their hard-to-borrow lists daily. A broker must be able to provide or locate the shares to loan to their client before executing the client's short sale transaction.
Regulation SHO, which was implemented on Jan. 3, 2005, has a "locate" condition that requires brokers to have a reasonable belief that the equity to be shorted can be borrowed and delivered to the short seller.1 The regulation is intended to prevent naked short selling, a practice where the investor places a short sale without holding the shares.
Hard-to-Borrow List vs. Easy-to-Borrow ListThe hard-to-borrow list is the opposite of the easy-to-borrow list, which is an inventory record of securities that are available for short sale transactions. In general, an investor can assume that securities not included on the hard-to-borrow list will be available for short selling. While a brokerage firm's hard-to-borrow list is typically an internal list that is not made available to clients, the firm's clients usually have access to the easy-to-borrow list.
Brokerage clients may have to pay hard-to-borrow fees on certain short sales. Typically, the cost of borrowing stocks on the difficult-to-borrow list is higher than for stocks that are on the easy-to-borrow list. Large brokerage firms usually have a securities lending desk that helps source stocks that are difficult to borrow. A brokerage's securities lending desk also lends securities to other firms.
Related Terms
Short Selling: Definition, Pros, Cons, and Examples
Short selling occurs when an investor borrows a security, sells it on the open market, and expects to buy it back later for less money. more
Easy-To-Borrow List
An easy-to-borrow list refers to extremely liquid securities that are readily available to investors seeking to engage in short selling transactions. more
What Does Days to Cover Mean, and How Do Investors Use It?
Days to cover measures the expected number of days needed to close out a company's shares outstanding that have been shorted. It's a measure of short interest in a stock. more
What Is a Stock Loan Fee (Borrow Fee)? Definition and Example
A stock loan fee, or borrow fee, is a fee charged by a brokerage firm to a client for borrowing shares. more
Short (Short Position) Definition
Short, or shorting, refers to selling a security first and buying it back later, with anticipation that the price will drop and a profit can be made. more
Stock Loan Rebate
A stock loan rebate is an amount of money paid by a stock lender to a borrower who has used cash as collateral for the loan. more
A hard-to-borrow list is an inventory record used by brokerages to indicate what stocks are difficult to borrow for short sale transactions. A brokerage firm's hard-to-borrow list provides an up-to-date catalog of stocks that cannot easily be borrowed for use as a short sale.
The hard-to-borrow list can be compared with a brokerage's easy-to-borrow list.
KEY TAKEAWAYS
- Short sellers rely on brokers to have stock shares available to borrow.
- If the broker has very few shares of a stock available, then that stock is placed on the hard-to-borrow list.
- Stocks on the hard-to-borrow list may not be short-sellable or have higher stock loan fees.
Brokerages have a variety of ways to provide access to shares that can be sold short. However, regardless of their methods, there is a finite number of shares available for shorting. Once the number of shares available has come close to running out, the broker will publish a notation of some kind on their platform. This alerts account holders that if they attempt to sell that security short, their trade order may be refused.
Short supply isn't the only reason why a security may be on the hard-to-borrow list. It may also be included because of high volatility or something else.
To enter a short sale, a brokerage client must first borrow the shares from their broker. To provide the shares, the broker can use its own inventory or borrow from the margin account of another client or another brokerage firm. The borrower (i.e., the short seller) must pay interest and fees on the borrowed shares. Those on the hard-to-borrow list can have higher stock loan fees as a result of being in shorter supply.
Investors who enter short sale transactions attempt to capture profits in a declining market. For example, an investor may think that shares in Apple are likely to drop in price. The investor can short sell the stock and, if the price falls as they anticipate, repurchase it back for a profit. If the stock rises, however, the investor loses money.
Hard-to-Borrow List RequirementsBrokerage firms update their hard-to-borrow lists daily. A broker must be able to provide or locate the shares to loan to their client before executing the client's short sale transaction.
Regulation SHO, which was implemented on Jan. 3, 2005, has a "locate" condition that requires brokers to have a reasonable belief that the equity to be shorted can be borrowed and delivered to the short seller.1 The regulation is intended to prevent naked short selling, a practice where the investor places a short sale without holding the shares.
Hard-to-Borrow List vs. Easy-to-Borrow ListThe hard-to-borrow list is the opposite of the easy-to-borrow list, which is an inventory record of securities that are available for short sale transactions. In general, an investor can assume that securities not included on the hard-to-borrow list will be available for short selling. While a brokerage firm's hard-to-borrow list is typically an internal list that is not made available to clients, the firm's clients usually have access to the easy-to-borrow list.
Brokerage clients may have to pay hard-to-borrow fees on certain short sales. Typically, the cost of borrowing stocks on the difficult-to-borrow list is higher than for stocks that are on the easy-to-borrow list. Large brokerage firms usually have a securities lending desk that helps source stocks that are difficult to borrow. A brokerage's securities lending desk also lends securities to other firms.
Related Terms
Short Selling: Definition, Pros, Cons, and Examples
Short selling occurs when an investor borrows a security, sells it on the open market, and expects to buy it back later for less money. more
Easy-To-Borrow List
An easy-to-borrow list refers to extremely liquid securities that are readily available to investors seeking to engage in short selling transactions. more
What Does Days to Cover Mean, and How Do Investors Use It?
Days to cover measures the expected number of days needed to close out a company's shares outstanding that have been shorted. It's a measure of short interest in a stock. more
What Is a Stock Loan Fee (Borrow Fee)? Definition and Example
A stock loan fee, or borrow fee, is a fee charged by a brokerage firm to a client for borrowing shares. more
Short (Short Position) Definition
Short, or shorting, refers to selling a security first and buying it back later, with anticipation that the price will drop and a profit can be made. more
Stock Loan Rebate
A stock loan rebate is an amount of money paid by a stock lender to a borrower who has used cash as collateral for the loan. more
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Les informations présentées ne constituent pas un conseil en investissement. Les présentes informations proviennent de sources extérieures et sont données à titre indicatif. AZ Parking et son Auteur Christian P. GATT, lui-même, ne sauraient être tenue responsable pour les dommages directs ou indirects résultants d'erreurs, d'omissions ou de modifications ultérieures des données.
Le placement en Bourse est risqué. Vous pouvez subir des pertes. Les performances passées ne préjugent pas des performances futures, elles ne sont pas constantes dans le temps. Avant toute décision d'investissement ou de désinvestissement dans ces produits, le Client doit impérativement apprécier ses choix en fonction de sa situation financière, de son expérience et de ses objectifs personnels en matière de placement (notamment en termes de degré d'acceptation du risque de perte en capital et de durée d'investissement envisagée).
ici pour modifier.