The Short List is a proprietary tool on TradeZero America’s trading platform that checks the availability and price per share of locate-required securities.

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The easy to borrow list (short list) is imported daily into the trading platform. 

If the stock is easy to borrow the trading platform will show a green "S" next to the symbol box.

The rate is determined by the supply and demand to locate the shares on that day.

The fees can vary during the day depending on market conditions. Locate fees are charged only after the price for the locate is accepted.

If the locate shares are declined, then no fee is charged.

TradeZero’s short list locator calculates the marginability of a stock based on the current price of the stock at the time you request the locate. 

If the stock drops below $3, the stock is no longer marginable.

This may occur between the time you locate shares and the time you place a short order. 

When a stock becomes non-marginable, this may reduce the number of shares you may trade regardless of how many shares you have located. 

Conversely, if the stock price rallies above $3, it will again become marginable and this too may increase the number of shares you can trade.

However, please keep in mind that TradeZero does not permit shorting any stock below $1.

If the price of a stock falls below $1 between the time you locate shares and the time you place a short order, you will not be able to short the stock. 

Furthermore, you will not be able to use any located shares while the stock remains below $1.

TradeZero cannot refund the cost of any shares you locate because of the change in marginability of the stock or if the stock drops below $1.

TradeZero does give you the ability to put up for credit any unused shares and if these shares are located by another TradeZero client, you can recoup up to 50% of the locate price.

You are able to take advantage of this feature until 8 PM ET.

When a stock is halted, it means trading is suspended by the regulatory bodies overseeing the exchanges and marketplaces. This may occur for a variety of reasons including, pending news, regulatory investigation, corporate restructure, or activation of the Limit Up Limit Down rule.

If a stock is halted only for a brief period during the day, your open short position can be covered when trading resumes.

However, if a stock is halted for an extended period of time and you cannot cover the open short position before the close of after-hours trading at 8 PM ET, you will be responsible to pay any overnight borrow costs, margin costs and any other fees incurred daily until the stock begins trading and the position can be covered or until DTC delists the security.

TradeZero will need to have sufficient equity in the account to cover these charges.

For more information on trading halts see: 

https://www.finra.org/investors/investing/investment-products/stocks/trading-halts-delays-suspensions

Regulation SHO Rule 204 is the Close-out Requirement that requires brokers and dealers that are participants of a registered clearing agency to take action to close out “failure to deliver” positions.

Under Rule 204(a) of Regulation SHO, all “failure to deliver” purchases must be closed out by borrowing or purchasing securities no later than the start of regular trading hours on the following settlement date.

If you day trade a security and consistently hold a short position, then you are consistently net short the security and are at risk of a “failure to deliver” if TradeZero America or it's clearing firm cannot borrow the securities.

TradeZero tries to make this process as transparent as possible. We request from our clearing house before close of business any client positions that are at risk of “failure to deliver”. We then send to those clients a notice via email so they can make a better decision whether to stay in the position or get out of the position.

Reg SHO Rule 204(b) states that if a clearing house does not close out its “failure to deliver” in an equity in accordance with Reg SHO Rule 204(a) then the clearing house and any broker dealer for which it receives trades for clearance and settlement may not accept short sale orders from its customers in that equity without first borrowing the security or entering into a bona fide arrangement to borrow the stock. To avoid this, TradeZero takes the extra step to inform its clients of any potential “failure to deliver.”

As a rule of thumb, stocks that have a small float or have a large short interest are more at risk of a “failure to deliver” resulting in receiving a Reg SHO Rule 204 notice than stocks that have a large float and small short interest. It is important to be an educated trader and understand the rules that may affect your decision making.

For more information visit:


https://www.sec.gov/investor/pubs/regsho.htm

https://www.sec.gov/divisions/marketreg/mrfaqregsho1204.htm

If you hold a short position after 8PM ET on Friday, the cutoff period to close your position, you will NOT be charged overnight borrow fees for the weekend due to the short trade settling on Monday. However, all short positions, if held after 8PM Eastern Time, the cutoff period to close your position, on Thursday, will be charged overnight borrow fees for the weekend due to any covering trade not settling until Monday at the earliest. It is important to understand, an overnight borrow fee is based on settlement (T+1) date. 
For Example:



On Tuesday, Sell Short 100 XYZ
On Thursday, Cover 100 XYZ
Reason: Cover trade settles on Friday



Will be charged for the weekend on Thursday


On Tuesday, Sell Short 100 XYZ
On Friday, Cover 100 XYZ
Reason: Tuesday trade settles on Wednesday and Friday trade settles on Monday




On Friday, Sell Short 100 XYZ
On Monday, Cover 100 XYZ
Reason: Friday trade settles on Monday




On Thursday, Sell Short 100 XYZ
On Monday, Cover 100 XYZ
Reason: Thursday trade settles on Friday


How are Overnight Borrow Fees charged on a Thursday?


All short positions, if held after 8PM Eastern Time (the cutoff period to close your position) on Thursday, will be charged overnight borrow fees for the weekend due to any covering trade not settling until Monday at the earliest. It is important to understand, an overnight borrow fee is based on settlement (T+1) date but charged by our clearing firm on T+2 date. If you hold a position short overnight on Thursday, your account will incur 3 nights of overnight borrow fees as the earliest a short position held overnight on Thursday can settle, will be Monday.

All short positions are charged the daily market rate which changes based on market conditions. In your client portal under Tools > Overnight Borrow Calculator, you will find an Estimated Overnight Borrow Calculator which will  provide an estimate for borrow costs related to any shares you would hold short overnight. TradeZero will hold back an estimated amount from your account balance on the trade date. When the overnight borrow fee is charged by our clearing firm, on T+2, the estimated amount held back from your account, will be returned, and the actual overnight borrow fee will be deducted from your account. It will look like this:

It is important to understand, an overnight borrow fee is based on settlement (T+1) date but charged by our clearing firm on T+2 date. If you short a security on Thursday, for example, and hold the short position overnight, your account will incur 3 nights of fees. This is because, a trade on Thursday, will settle on Friday and the cost of the overnight borrow carry over the  weekend, and end when the covering trade settles on T+1. A short trade on  Friday, however, will not settle until Monday, so you will not be charged an overnight borrow fee over the weekend.

 *If an account receives a Reg SHO Notice, the shares receiving the notice, no matter whether a fee was paid, will need to be liquidated as per Reg SHO Notice by the clearing firm.



Why is TradeZero America charging overnight borrows this way?


Beginning April 1, 2025, TradeZero America is moving the billing of overnight borrow fees in line with how the fees are charged by the clearing firm. We believe this should lead to lower net overnight borrow costs and a savings for the client.



All short positions, if held after 8PM Eastern Time (the cutoff period to close your position) on Thursday, will be charged overnight borrow fees for the weekend due to any covering trade not settling until Monday at the earliest.

It is important to understand, an overnight borrow fee is based on settlement (T+1) date but charged by our clearing firm on T+2 date.

If you hold a position short overnight on Thursday, your account will incur 3 nights of overnight borrow fees as the earliest a short position held overnight on Thursday can settle, will be Monday.

Equity securities with a market value of less the $3 per share may not be purchased on margin or deposited as margin collateral.

If the market value of a security drops below $3 per share, the security will not be assigned any value as collateral to secure your margin obligation.

As of August 2, 2024, the new margin requirement for short positions that are low priced is as follows:

Stocks priced below $5.00 = $5.00 per share margin requirement

Margin requirement = 5,000 x $5 = $25,000

Please also be aware that margin requirements may change daily and overnight due to various factors including, but not limited to, volatility, low float, and percentage of insider holdings.

Short Selling