Shortable Stocks

We make the stocks listed under the following links available for shorting:

North America
Country	Shortable Stocks
United States	Shortable: 10189   Listed for Trading: 30039 Stocks Restricted By Emergency Regulations (Sept 2008)
Canada	None available at this time

Click Here for most recent updates, if available.

Europe
Country	Shortable Stocks
Germany	None available at this time
United Kingdom	Shortable: 4   Listed for Trading: 1688 Stocks Restricted By Emergency Regulations (Sept 2008)
France	None available at this time
Netherlands	None available at this time
Switzerland	None available at this time
Belgium	None available at this time
Sweden	None available at this time

Click Here for most recent updates, if available.

Asia
Country	Shortable Stocks
Australia	None available at this time
Japan	None available at this time
Hong Kong	None available at this time

Click Here for most recent updates, if available.

IB customers who only execute through IB, but do not use IB as their clearing broker or custody agent ("Non-Clearing Customer"), may click here for a list of valid Market Participant Identifier (MPID) codes to be entered with their short sale orders.

The SEC emergency order 34-58592 expired on 9 October 2008.

The UK Financial Services Authority (“FSA”) has issued a prohibition on short sales in approximately 40 UK-listed Financial Services Companies. The prohibition is complex and refers to any trading strategy that is economically equivalent to a short sale, and therefore applies as well to derivative strategies such as put option purchases or call option sales. The rule remains in effect, subject to FSA review, until January 2009. More information regarding UK short sale regulations can be found on the FSA website, and also at:
http://www.fsa.gov.uk/Pages/Library/Communication/PR/2008/index.shtml
http://www.fsa.gov.uk/pubs/handbook/list_instrument200850.pdf

Many countries have imposed special restrictions on short selling. IB has respected the regulations where the restriction is consistent with IB's existing systems. Where the regulations define security lending practices not currently supported by IB, we have restricted short sale activities altogether.

General Prohibition: Italy

Pre-Borrow Restriction (short sales allowed only with pre-borrow prior to the actual sale): IB does not support pre-borrow services. All stocks are therefore effectively restricted: Australia, Switzerland

Restrictions on Specific Stocks: UK, Germany, France, Netherlands, Canada, Norway

The Securities and Exchange Commission ("SEC") has issued new rules to protect investors against abusive or manipulative strategies involving short selling. These rules went into effect Thursday, September 18, 2008. The SEC has also adopted Rule 10b-21, which expressly targets fraudulent short selling transactions by any seller who deceives a broker/dealer or other market participant.

The rules, which have been released on an interim basis until October 17, 2008, require market participants to meet their delivery obligations for stock and other deliverable securities on the scheduled settlement date (generally three business days after the sale transaction date, or "T+3"). Firms who fail to comply with the new rules will be subject to fines and/or sanctions.

The new rules create a defense against short sellers who, either by intent or otherwise, fail to deliver the stock that they transacted. There are several provisions in the rules describing actions that may or must be taken by the broker/dealer/clearer when they are unable to meet their delivery obligations. Clients interested in understanding the rules as announced by the SEC can find them at: http://sec.gov/news/press/2008/2008-204.htm

Due to the short notification of the new rules, Interactive Brokers will deploy our implementation in phases, the first phase being an automated buy-in when we are unable to meet delivery obligations. If we are unable to make delivery on stock sold short by our clients for any reason, we will repurchase the sold shares as soon as we determine that we are unable to make actual delivery on settlement day or as soon as is practical thereafter. These "buy-ins" will be applied to the client accounts who initiated the short transactions and are unable to make timely delivery. Regrettably, the timeline required by the rules will provide little opportunity for advance communications to clients. A more complete discussion of the typical Stock Lending and Borrowing (SLB) mechanism can be found by clicking here.

We anticipate that the new rules may result in more limited availability of shares available to borrow and may also limit the trader’s ability to maintain a short position if the borrowed shares are recalled by the lender. We strongly recommend that traders take into consideration that they may be forced to repurchase short positions with little or no advance notification under these new rules.

IB provides a stock inventory utility in Account Management, under the "Tools" icon. This utility provides indicative inventory information, estimates of the number of shares currently available for borrowing, estimated borrow rates, rate trends, and an indicator of how many different lenders are prepared to make their inventory available. By considering this pool of information, traders can manage their short selling strategies appropriately.

 

1. Trader decides to sell a stock short in the hopes of being able to repurchase it at some later point in time at a lower price.
   
   
2. In order to make delivery of the stock, Trader A will need to actually have shares and so will need to borrow the stock from their broker or through another broker. Brokers keep a list of available inventory on what is called a Box List. Brokers populate the Box List through their own inventory and shares of other customers, such as trader C, that borrow on margin and agree to lend their shares⁽¹⁾.
   
   
3. Trader A, having found a source to borrow the shares⁽²⁾, executes a short sale transaction on trade date, or "T"⁽³⁾. Most major equity markets have a 3 day settlement period, i.e. the actual exchange of shares versus cash occurs on T+3, 3 business days after trade date. Settlement date is sometimes also referred to simply as "S".
   
   
4. On the morning of T+3 (or S), Trader A's Securities Lending Department determines its actual delivery obligations for that day. They consult their own Box List and if inventory is not available for borrowing, they consult the Box List of other brokers. Borrow transactions are arranged and the delivery of the shares from the lending broker to the borrowing broker is effected if needed. These borrowed shares⁽⁴⁾ provide Trader A's broker with the necessary inventory to deliver onward to settle the short sales⁽⁵⁾.
   
   It is important to understand that there will be situations where a given stock appears to be borrowable on T, but in the intervening 3 days, the availability changes such that on T+3, it is no longer borrowable. This creates a situation in which the short sale trades will "fail", in other words the timely delivery obligation will not be met by the broker. In this case, a forced repurchase, or "buy-in" may be issued by the broker and the resulting trade will be charged to the trader's account, thereby reducing or eliminating the short position.
   
   
5. In exchange for Trader A selling the borrowed shares, the cash received from selling the shares is used as collateral on Trader A's borrowed shares ⁽⁶⁾.
   
   
6. Trader A's Broker invests the cash collateral and uses a portion of the interest to pay administration fees and stock borrowing fees. Because of steep administration costs, remaining interest is generally only paid out to large balance short sellers. In certain hard to borrow cases, borrowing fees are so high (greater than the interest earned) that the short seller needs to pay for the privilege of borrowing stocks.
   
   
7. Any dividend paid during the term of the short sale will be paid to the purchaser (Trader B) who holds the borrowed shares. The Lender of the Shares (Trader C) will need to be paid dividends by the Short Seller (Trader A) in what is called Payment in Lieu of Dividends⁽⁷⁾.
   
   
8. At some point in the future, the need to maintain the borrow is reduced (presumably by Trader A repurchasing his short position), or the lender (Trader C) may decide that he wishes to recall his shares for his own use. In the latter case, the broker will try to find another lender, the loan will simply be moved from Trader C to a new trader or broker, and Trader A's short position will remain unaffected.
   
   In the case that no substitute loan can be arranged, the broker may notify Trader A that the loan has been recalled and that the trader must cover his/her position immediately. In many cases the broker will simply execute the forced repurchase, or buy-in, of the recalled shares.

New SEC regulations which took effect 18 September 2008, require that stock sale transactions meet delivery obligations on the standard settlement date, generally three business days after the trade date. The regulations additionally require a repurchase of securities that are not delivered ("fail") by the next trading session for the securities. This contrasts with previous practice wherein a trade could "fail" for several days after the target settlement date, permitting brokers more time to make delivery by finding lenders for the stock(s).

As a result of the unprecedented change in market practice, the availability of many stocks in the stock borrow market has declined leading to an increasing rate of short sale "fails", as well as an increase in the existing stock loans that are recalled by the originating lender. For a fuller discussion of short sale and stock borrow and lend ("SLB") mechanics, please click here.

IB's implementation of the SEC regulations is as follows:

1. On the standard settlement date, at approximately 13:00 EST, IB will make an estimate of the transactions that have actually settled, including any borrow transactions required. Generally stock borrowing is completed early in the morning of settlement day, so the 13:00 estimation is generally a good predictor under normal conditions. In the current stressed SLB environment, we are observing settlement transactions continuing until late in the day, sometimes even after the close of trading, making the 13:00 estimate correspondingly less accurate. There is little IB can do about this as it is a side effect of market conditions.
   
   
2. IB will disseminate an indication of possible buy-ins shortly after 13:00. Clients should recognize that these notifications communicate only the possibility, not the certainty, that we will be unable to make timely delivery thereby necessitating a buy-in. The purpose of the communication is to allow clients an opportunity to repurchase the short securities themselves thereby retaining greater control over their portfolios.
   
   
3. At about 20:00, IB will reconcile any late settlements as well as client transactions up to the end of the regular trading session at 16:00 EST. IB will consider the net of all trades on the day when determining the position, including any new short sales. Trades after 16:00 will not be included in our position reconciliation. IB will then calculate the actual buy-in requirement based on complete information.
   
   
4. IB will report transactions on client statements and in the real time brokerage system shortly thereafter using the the closing price of the regular trading session. The buy-in will be reflected under the Trades section of the statement with a code of "L, B, C" and the exchange designation of TRANSFER. The trade quantities should reflect the final trade that will be allocated to client accounts. The price is merely an estimate. IB's purpose to "pre-book" the buy-in trades is to allow clients the best possible view of their positions.
   
   
5. On, or immediately after, the commencement of trading on the next business day (generally the 4th business day after the original short sale transaction), IB will execute transactions in the open market to effect the actual buy-in, as required by the SEC rules. In case the buy-in transactions occur at multiple prices, we will calculate the volume weighted average price for the buy-ins.
   
   
6. On the statement of 4th day, IB will rebook the buy-in trades by reversing the original "pre-booking" and reporting the final trade details.

The above procedure refers to transactions that fail to settle directly resulting from a short sale. A nearly identical procedure will be applied for existing stock borrows that are recalled by lenders. Recalls can occur at any time so in many cases little, and sometimes no, adequate notification can be distributed to clients. For recalls made in the morning, IB will be able to provide notification as described above. For late recalls after 13:00, IB will attempt to provide notification on a best efforts basis.