What Is a Short Locate? How Stock Locates Work

A short locate is the process of confirming that shares of a stock are available to borrow before a short sale is placed.

When you short a stock, you're selling shares you don't currently own. Before your broker can accept the short sale, it must make a reasonable determination that those shares can be borrowed and delivered for settlement.

That's where the locate comes in.

A locate doesn't put you into a trade. It confirms that shares are available to borrow so that you have the opportunity to enter a short position.

The locate process can be broken down into four stages:

Request → Offer → Accept → Expiry or Credit

1. Request a Locate

You enter the ticker, choose the number of shares you may want to short and submit a locate request.

At this point, you're simply asking your broker to check whether shares are available to borrow. Nothing has been reserved and no locate fee has been charged.

2. Receive a Locate Quote

Your broker searches its network of securities lenders for available shares.

If shares are available, you'll typically receive a quote showing:

the number of shares available to locate
the per-share locate fee

You're under no obligation to accept the quote. If the cost doesn't make sense for the trade you're considering, you can decline it.

3. Accept the Locate

This is the important part.

The locate fee becomes payable when you accept the locate — not when you enter the short position.

You're paying to reserve access to those shares. That means the locate fee can still apply even if you ultimately decide not to place the trade.

For example, suppose you locate 500 shares of a hard-to-borrow stock at $0.08 per share.

500 × $0.08 = $40

Once you accept that quote, you've committed to a $40 locate fee.

If the stock moves against your setup five minutes later and you decide not to short it, the locate fee still applies because the borrow was already reserved.

An unused locate will expire at the end of the trading session rather than carrying over to the next trading day.

However, depending on your broker, you may have an opportunity to recover some of the cost of an unused locate.

What Happens to Unused Locates at TradeZero?

If you're trading with TradeZero and no longer need your locates, you can list them back to the TradeZero network through TradeZero's proprietary Locator.

If another user purchases them, you can recover a portion of the locate fee you originally paid.

This can be particularly useful when you've secured shares of a hard-to-borrow stock but later decide that the trade no longer fits your setup.

Not every stock is equally easy to borrow.

An easy-to-borrow (ETB) stock generally has ample shares available relative to demand.

A hard-to-borrow (HTB) stock has limited borrowable inventory relative to demand. This scarcity triggers variable locate fees that rise as availability shrinks, meaning demand can easily outstrip supply and leave some locate requests unfulfilled.

Borrow availability and pricing can also change. A stock that's easy to borrow today could become hard to borrow as demand from short sellers increases or the available lending inventory decreases.

The terms are related, but they describe different things.

Hard-to-borrow describes the stock.

It means borrowable shares are relatively scarce compared with current demand.

Short locate describes the process.

It's the process through which your broker confirms that shares are available to borrow before accepting a short sale.

You may therefore encounter the locate process with both easy-to-borrow and hard-to-borrow securities, although it becomes much more noticeable when shares are scarce or expensive to borrow.

A locate and margin serve different purposes.

A locate relates to the availability of shares to borrow before entering a short position.

Margin relates to the financial requirements associated with holding the position.

A locate, therefore, doesn't mean you've entered the trade, and paying a locate fee isn't the same as paying margin interest.

Locate pricing isn't necessarily fixed.

The availability and cost of borrow can be influenced by supply and demand in the securities lending market.

If many traders want to short a stock while relatively few shares are available to borrow, the cost of locating those shares can increase. This is particularly relevant with hard-to-borrow and actively traded small-cap stocks.

Before accepting a locate, consider:

• Am I likely to trade this stock?
• Does the setup justify the locate fee?
• What will the locate cost at the number of shares I want?
• Am I comfortable paying the fee if I ultimately don't enter the trade?

Remember: accepting a locate reserves access to shares. It doesn't commit you to entering the short position.

Do I pay a locate fee if I don't place the trade?

If you've accepted a paid locate, the locate fee will still apply even if you never enter the short position. The fee relates to reserving the borrow rather than executing the trade.

When is the locate fee charged?

The locate fee becomes payable when you accept the quoted locate, rather than when your short order fills.

Do short locates expire on TradeZero?

Yes. Locates are valid for the current trading day only and expire at the 8:00 PM ET post-market close. You cannot roll unused locates over to the next morning.

If you choose to hold an active short position past the 8:00 PM ET expiration cutoff, it becomes an overnight borrow subject to variable daily fees. Be especially careful on Thursday nights; holding a short position past the Thursday cutoff triggers a multi-day settlement delay, meaning TradeZero will need to charge you three full days of borrow fees over the weekend.

Can I get money back for an unused locate?

This depends on your broker. With TradeZero, unused locates can be listed back to the TradeZero network through TradeZero's proprietary Locator. If another user purchases them, you can recover a portion of the fee you originally paid.

Is a locate the same as borrowing stock?

A locate confirms the availability of shares to borrow for a potential short sale. It does not itself mean you've entered a short position.

Are all stocks hard to borrow?

No. Stocks can be easy to borrow or hard to borrow depending on the availability of lendable shares relative to demand.

Can a stock move from easy-to-borrow to hard-to-borrow?

Yes. Borrow availability can change as market conditions, short-selling demand and available inventory change.

The simplest way to think about a short locate is as a reservation for the opportunity to short a stock.

You request the shares, receive a quote and decide whether the cost makes sense. Once you accept the locate, the fee becomes payable because the borrow has been reserved — whether you ultimately place the trade or not.

For active short sellers, understanding that distinction matters.

Request → Offer → Accept → Expiry or Credit.

And if you're trading with TradeZero, eligible unused locates may provide an opportunity to recover a portion of the original locate fee through the TradeZero Locator.

(Please Note: Availability of locates is not guaranteed and may vary based on market conditions and security availability. Eligibility for credits or other recovery of fees for unused locates is subject to applicable terms, conditions, and operational requirements.)

TradeZero America, Inc., a United States broker dealer, registered with the Securities and Exchange Commission (SEC) and member of the Financial Industry Regulatory Authority (FINRA) and the Securities Investor Protection Corporation (SIPC); TradeZero, Inc., a Bahamian broker dealer, registered with the Securities Commission of the Bahamas; TradeZero Canada Securities ULC, a Canadian broker dealer, member firm of Canadian Investment Regulatory Organization (CIRO) and member of the Canadian Investor Protection Fund (CIPF); and TradeZero Europe B.V., a Dutch broker dealer, authorized and regulated by the Dutch Authority for the Financial Markets (AFM) (collectively, the “TradeZero Broker Dealers”).

TradeZero Broker Dealers offer self-directed electronic securities trading services. They do not provide financial or trading advice, nor do they make investment recommendations. The Content has been made available for informational and educational purposes only and should not be considered trading or investment advice or a recommendation as to any security.
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