Hard-To-Borrow List


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.

  1. Securities And Exchange Commission ...

    A government commission created by Congress to regulate the securities ...
  2. Short Sale

    A market transaction in which an investor sells borrowed securities ...
  3. National Association Of Securities ...

    The NASD was a self-regulatory organization of the securities ...
  4. Broker

    1. An individual or firm that charges a fee or commission for ...
  5. Easy-To-Borrow List

    A list of securities deemed to be available for borrowing in ...
  6. Bear Closing

    Purchasing a security, currency, or commodity in order to close ...
Related Articles
  1. Active Trading Fundamentals

    When To Short A Stock

    Learn how to make money off failing shares.
  2. Fundamental Analysis

    Short Sales For Market Downturns

    This strategy can help in market downturns, but it's not for inexperienced traders.
  3. Active Trading Fundamentals

    Short Interest: What It Tells Us

    This figure can be a real eye-opener about the market sentiment surrounding a given stock.
  4. Active Trading Fundamentals

    Short Selling Risk Can Be Similar To Buying Long

    If more people understood short selling, it would invoke less fear, which could lead to a more balanced market.
  5. Active Trading Fundamentals

    The Short And Distort: Stock Manipulation In A Bear Market

    High-quality stock reports needn't be confused with stock manipulators' dramatic claims.
  6. Mutual Funds & ETFs

    Using Short ETFs to Battle a Down Market

    Instead of selling your stocks to get gains, consider a short selling strategy, specifically one that uses short ETFs that help manage the risk.
  7. Investing

    Watch Your Duration When Rates Rise

    While recent market volatility is leading investors to look for the nearest exit, here are some suggestions for bond exposure in attractive sectors.
  8. Investing

    A Quick Explanation of How Short Selling Works

    Explanations of short selling can be hard to grasp. Here is a quick, realistic example.
  9. Chart Advisor

    Downtrending Stocks to Short or Sell

    These stocks are trending lower and currently near a short sale areas, based on breaks lower and falling stock indexes.
  10. Chart Advisor

    Second Chance Entries Into Completed Double Tops

    These stocks have already completed double top chart patterns, and are right now offering a second chance to trade it.
  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 Full Answer >>
  2. How can an investor profit from a fall in the utilities sector?

    The utilities sector exhibits a high degree of stability compared to the broader market. This makes it best-suited for buy-and-hold ... Read Full Answer >>
  3. How can an investor profit from a decline in the real estate sector?

    Speculation enables investors to profit from a decline in the real estate sector. The most popular forms of speculation for ... Read Full Answer >>
  4. How can I evaluate if a stock is a short squeeze?

    To evaluate whether a stock is a short squeeze, traders should examine its fundamentals, short interest and price history. ... Read Full Answer >>
  5. What is the difference between a short squeeze and short covering?

    "Short covering" and "short squeeze" are different terms to describe a situation involving short positions. A short squeeze ... Read Full Answer >>
  6. How does days to cover a short position relate to a short squeeze?

    Days to cover a short position reveals the intensity and duration of a potential short squeeze. A short squeeze occurs when ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  2. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  3. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
  4. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
  5. Cost Of Funds

    The interest rate paid by financial institutions for the funds that they deploy in their business. The cost of funds is one ...
  6. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!