Short Locates: How Traders Secure Shares Fast

Short selling involves more than simply betting on a stock’s decline — it begins with securing the right to sell shares you don’t own.

Before initiating a short sale, traders must first confirm that borrowable shares are available and request permission to access them. This is especially crucial when dealing with hard-to-borrow (HTB) stocks — typically volatile, low-float names that are popular among short sellers but limited in inventory.

Failing to secure a locate doesn’t just reduce your chances of catching the trade — it makes it legally impossible to participate. Regulations require that traders locate borrowable shares before executing a short sale, and in fast-moving markets, hesitation can mean missing the window entirely.

TradeZero specializes in short-side access by offering real-time locate tools that give traders visibility and speed where it counts. Understanding how the locate process works is the first step to executing clean, compliant, and timely trades.

Before a trader can short a stock, they must first “locate” shares — meaning they need documented access to borrowable inventory before executing a short sale.

This isn’t optional or platform-specific; it’s a regulatory requirement under SEC Rule 203(b)(1) of Regulation SHO. The locate process ensures that traders can reasonably expect to deliver the shares when settling the short trade.

In the simplest of terms, a locate is permission to borrow stock. It confirms that shares are available from a lender — often a prime broker or clearing firm — and that the trader has secured a temporary claim to borrow them for a short sale. This protects market integrity by preventing excessive naked shorting and helps brokers manage locate risk and compliance.

Locate requirements apply primarily to hard-to-borrow (HTB) stocks. These are names with low float, high volatility, or high demand among short sellers. Easy-to-borrow (ETB) stocks, by contrast, often have abundant inventory and don’t require traders to request a locate manually — the system automatically assumes availability.

Without a confirmed locate, a trader can’t legally place a short order, and attempting to do so could result in a rejected trade or a compliance violation. It’s the first filter between strategy and execution.

Many of the most explosive opportunities for short sellers occur in hard-to-borrow (HTB) stocks: low-float names that spike rapidly, attract retail volume, and then collapse just as fast. These setups are common in the premarket, around midday reversals, and during closing flushes. But none of it matters if you can’t access shares in time

Without a locate, you cannot legally execute a short sale. The system will block the order from going live. Even if a setup aligns technically, there’s no trade unless borrowable shares have been secured in advance. For this reason, short sellers must treat the locate process as part of trade preparation — not an afterthought.

Speed is also a critical factor. Shares of HTB stocks are limited, and demand among short sellers can deplete availability within minutes — or even seconds — after a stock hits scanners. The longer you wait, the more likely the shares are gone or the locate fee has risen sharply. Missing the locate window can mean watching the ideal setup play out with no way to participate.

In fast-moving markets, hesitation is costly. Traders who rely on short strategies need to build the habit of securing locates early, checking availability often, and understanding that the locate process is every bit as strategic as identifying the trade itself.

TradeZero offers a fast and flexible system for short sellers to secure shares, particularly when dealing with hard-to-borrow (HTB) stocks. Its locate tool is built into all versions of the platform — including desktop, web, and mobile — and gives traders access to short locates from 4:00 AM to 8:00 PM Eastern Time.

When a trader finds a stock they want to short, they can immediately search for availability using the locate tool. If shares are available, the trader can view the per-share fee and choose whether to accept it. Pricing is dynamic and based on current supply and demand. Fees are only charged once a locate is confirmed.

Standard locates allow traders to enter and exit multiple positions in the same stock throughout the day, assuming the stock is not on a regulatory threshold list.

Single-use locates are designed for threshold securities and permit one short and one cover per trading session. These are often cheaper and automatically offered when applicable.

Pre-borrow locates are ideal for traders expecting to hold short positions overnight or who plan to trade the same ticker repeatedly. These come at a premium but offer more flexibility.

Traders can also mark unused locates for potential credit. If another user takes over the locate, the original trader may receive a partial refund — an added layer of cost control.

Altogether, the system gives short sellers transparency, speed, and choice — critical advantages when timing matters.

Short locates come at a cost, and understanding the fee structure is essential before entering any trade. Fees are typically quoted on a per-share basis and can vary widely depending on the stock’s float, volatility, current demand, and overall availability.

Highly sought-after names — especially those moving on news or showing parabolic price action — will generally command higher locate fees. In some cases, the cost of the locate alone may exceed the profit potential of the trade.

These costs add up quickly for active traders. Every locate represents a financial commitment, and even if the trader doesn’t follow through with the short, the fee may still be nonrefundable unless the locate is returned or credited in time.

This makes timing and intent critical. Securing a locate without a clear plan for execution can lead to unnecessary losses, especially if the setup never materializes or the stock loses momentum before entry.

There’s also strategic risk. Shorting HTB stocks inherently involves more volatility, less liquidity, and increased likelihood of squeeze conditions. Without a well-defined entry and exit strategy, the cost of the locate can quickly be compounded by slippage, fast reversals, or margin calls. Traders who underestimate this dynamic often learn the hard way that paying for access doesn’t guarantee success.

Ultimately, locates should be treated as part of trade cost and risk planning — not just a checkbox. The best short setups justify the added expense. The rest aren’t worth touching, no matter how tempting the chart may look.

Securing a locate is only the first step. To make the most of every opportunity — and to avoid wasting capital — traders need to apply structure and discipline to how they use them.

Get in early. Many hard-to-borrow stocks are most active in the premarket or early morning. Waiting too long to request a locate can mean higher costs or no availability at all. TradeZero allows traders to request locates as early as 4:00 AM ET, giving short sellers a significant timing advantage.

Avoid sitting on unused locates. Fees are typically charged regardless of whether the trade is executed. If you're not ready to act, or if your thesis is unclear, hold off. TradeZero offers the option to mark unused locates for credit. If another trader picks it up, you may receive a partial refund — adding a layer of flexibility not found on many platforms.

Always trade with a plan. Hard-to-borrow stocks are volatile and can reverse violently. Every locate should be paired with a well-defined setup: clear entry, exit, and stop levels. Scaling position size to match risk is critical when dealing with fast-moving names.

Use TradeZero’s built-in tools. The platform gives traders visibility into locate costs before confirming, and allows filtering by symbol or fee. After execution, the locate dashboard also lets traders track filled requests and monitor usage history — helpful for reviewing cost-efficiency over time.

Disciplined traders treat each locate as a resource. TradeZero gives them the control, visibility, and optionality to use that resource wisely.

Short locates are a foundational part of short selling — especially in active markets where the best setups are often the hardest to access. Without a locate, there’s no trade. But with one, traders gain the ability to act quickly and legally on fast-moving opportunities.

Understanding how locates work, what they cost, and how to use them efficiently can significantly improve both execution and outcomes. TradeZero’s locate infrastructure — real-time access, flexible options, and built-in cost tracking — gives traders an edge in timing and control.

For those who make their edge on the short side, mastering the locate process is as important as spotting the setup itself. Execution starts long before the first order is placed.

Frequently Asked Questions About Short Locates

1. What is a short locate and why is it required?

A short locate is confirmation that borrowable shares are available for a short sale. Under SEC Regulation SHO, traders must secure a locate unless the stock is classified as “easy-to-borrow” (ETB). The locate rule ensures traders can reasonably expect to borrow the shares and helps prevent naked short selling.

2. Do I need a locate for every short sale?

No. If a stock is on your broker’s easy-to-borrow list, you do not need to manually request a locate. The system assumes borrowable shares are available. For Hard to Borrow stocks, however, a confirmed locate is mandatory before execution.

3. What’s the difference between a locate and a pre-borrow?

A standard locate is a confirmation of share availability at the time of your short sale. A pre-borrow reserves shares in advance — typically for overnight holds or multiple trades. Pre-borrows come at a premium but offer more flexibility and certainty.

4. Are short locate fees refundable if I don’t place the trade?

At TradeZero, when you no longer need your locate, you can potentially reapply your shares to another TradeZero customer by marking the shares for credit and recoup part of the fee paid. If the shares are reassigned to another TradeZero customer, you can receive a partial credit on the original locate fee.

5. When should I request a short locate?

As early as possible, especially for Hard to Borrow stocks. TradeZero allows traders to request locates starting at 4:00 AM ET.

6. What happens if I try to short a Hard to Borrow stock without a locate?

Your order will be rejected. For Hard to Borrow stocks, the system requires a confirmed locate before allowing execution.

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