DEFINITION of 'Hard-To-Borrow List'

An inventory used by brokerages to indicate securities that are unavailable for borrowing for short sale transactions. A brokerage firm's hard-to-borrow list provides an up-to-date catalog of securities that cannot be shorted. The security may be on the hard-to-borrow list because it is in short supply or because of its volatility. In order to enter a short sale, a brokerage client must first borrow the shares from the broker. To provide the shares, the broker can use its own inventory or borrow from the margin account of another client or from another brokerage firm.

BREAKING DOWN 'Hard-To-Borrow List'

Investors who enter short sale transactions attempt to capture profits in a declining market. For example, an investor may think that stock ABC will drop in price in the future. The investor can short stock ABC and, if the price drops as he or she anticipated, buy to cover for a profit. If the stock rises, however, the investor will lose money.

The hard-to-borrow list is updated on a daily basis. In order to enter a short transaction, the broker must be able to provide, or locate, the shares to loan to the brokerage client making the short sale. Regulation SHO, implemented on Jan. 3, 2005, has a "ocate"condition that requires broker to have a reasonable belief that the equity to be shorted can be borrowed and delivered to a short seller. The regulation is intended to prevent naked short selling practices.

While a brokerage firm's hard-to-borrow list is typically an internal list (and one that is not available to clients), the firm' clients generally have access to the easy-to-borrow list. Brokerage clients may have to pay hard-to-borrow fees on certain short sales.

The hard-to-borrow list is the opposite of the easy-to-borrow list which is an inventory of securities that are available for short sale transactions. In general, an investor can assume that a security that is not included on the hard-to-borrow list will be available for the purposes of short selling.

RELATED TERMS
  1. Easy-To-Borrow List

    A list of securities deemed to be available for borrowing in ...
  2. Brokerage Company

    A business whose main responsibility is to be an intermediary ...
  3. Brokerage Account

    An arrangement between an investor and a licensed brokerage firm ...
  4. Approved List

    A list of pre-selected securities that are deemed fit for purchase ...
  5. Rebate

    1. In a short-sale transaction, the portion of interest or dividends ...
  6. Firm Order

    1. A market order to buy or sell a security for a brokerage's ...
Related Articles
  1. Investing

    What's a Brokerage Account?

    A brokerage account is a contractual arrangement between an investor and a licensed securities broker or brokerage.
  2. Investing

    The Basics Of Short Selling

    Short sellers enable the markets to function smoothly by providing liquidity, and also serve as a restraining influence on investors’ over-exuberance.
  3. Financial Advisor

    Understanding Brokerage Fees

    Agents charge brokerage fees for facilitating transactions between buyers and sellers.
  4. Investing

    The Truth About Naked Short Selling

    The media demonizes naked short selling, but in most cases it occurs in a collapse, rather than causing it.
  5. Trading

    Short Sales For Market Downturns

    This strategy can help in market downturns, but it's not for inexperienced traders.
  6. Investing

    Why Short Sales Are Not For Sissies

    Short selling has a number of risks that make it highly unsuitable for the novice investor.
  7. Trading

    Principal Trading and Agency Trading

    Ever wonder what happens behind the scenes when you buy or sell a stock? Read on and find out!
RELATED FAQS
  1. What is the hard-to-borrow list?

    A hard-to-borrow list has to do with securities that are available for a short sale. The list is used by brokerages to indicate ... Read Answer >>
  2. Can you short sell stocks that are trading below $5? My broker says that I can't.

    Short selling can be very risky for both the investor and the broker. Brokers will often tell investors that only stocks ... Read Answer >>
  3. Why does my broker allow me to enter only day orders for short selling?

    Put simply, brokerage firms restrict short sales to day orders because of the complexity of the short sale transaction and ... Read Answer >>
  4. When short selling a stock, how long does a short seller have before covering?

    There are no general rules regarding how long a short sale can last before being closed out. A short sale is a transaction ... Read Answer >>
  5. What happens when the lender of the borrowed shares in a short sale transaction wants ...

    In a short sale transaction, shares are borrowed from the lender by the short seller and sold in the market. The lender of ... Read Answer >>
  6. Under what circumstances is short selling advisable?

    Find out when short selling a stock is profitable and what an investor should keep in mind before deciding to pursue a short ... Read Answer >>
Hot Definitions
  1. Cash Flow

    The net amount of cash and cash-equivalents moving into and out of a business. Positive cash flow indicates that a company's ...
  2. PLUS Loan

    A low-cost student loan offered to parents of students currently enrolled in post-secondary education. With a PLUS Loan, ...
  3. Graduate Record Examination - GRE

    A standardized exam used to measure one's aptitude for abstract thinking in the areas of analytical writing, mathematics ...
  4. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
  5. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
  6. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
Trading Center