Easy-To-Borrow List

Easy-To-Borrow List

An easy-to-borrow list is a record that a brokerage updates on a daily basis and is comprised of extremely liquid securities that are readily available, thus assuring delivery, to investors seeking to engage in short sale transactions. The easy-to-borrow list can be contrasted with the hard-to-borrow list, which indicates those shares that are not readily available for short selling. An easy-to-borrow list is a record that a brokerage updates on a daily basis and is comprised of extremely liquid securities that are readily available, thus assuring delivery, to investors seeking to engage in short sale transactions. Compared to securities on an easy-to-borrow list, hard-to-borrow securities almost always come with more fees for access to the securities. An easy-to-borrow list is comprised of extremely liquid securities that are readily available, thus assuring delivery, to investors seeking to engage in short selling transactions.

An easy-to-borrow list is comprised of extremely liquid securities that are readily available, thus assuring delivery, to investors seeking to engage in short selling transactions.

What Is Easy-To-Borrow List?

An easy-to-borrow list is a record that a brokerage updates on a daily basis and is comprised of extremely liquid securities that are readily available, thus assuring delivery, to investors seeking to engage in short sale transactions.

The easy-to-borrow list can be contrasted with the hard-to-borrow list, which indicates those shares that are not readily available for short selling.

An easy-to-borrow list is comprised of extremely liquid securities that are readily available, thus assuring delivery, to investors seeking to engage in short selling transactions.
Securities that are on the easy-to-borrow list, in addition to being easier to short, usually have lower transaction costs.
Hard-to-borrow shares, in contrast, are difficult to locate for short sellers and if loaned will carry higher costs to transact.

Understanding Easy-To-Borrow List

In order to sell short a stock, a customer must first locate and borrow existing shares in order to sell them — with the hope of making a profit by buying them back at a lower price. In other words, you cannot sell short shares out of thin air. Brokers must locate shares on behalf of interest shorts and lend them. While they are loaned out, the short seller pays interest on the loan via a margin account. Whether or not a stock is easy to borrow will affect those interest charges, with harder to borrow stocks demanding a higher rate. Easy to borrow stocks, on the other hand, are less costly to short.

The easy-to-borrow list is updated every 24 hours. It gives investors and brokerage firms the ability to transact short sales more readily, as they aren't required to research the availability of a stock every time it is requested for a short sale transaction. Instead, they can assume that stocks on the list are readily available. Appearing to this list usually means that a company's shares are highly liquid and/or there are a sufficiently high number of outstanding shares, or float.

Easy vs. Hard to Borrow

In contrast to the easy-to-borrow list, brokers will also maintain a hard-to-borrow list. These securities are naturally more challenging to borrow for short sale motivations. Often, a security may be on the hard-to-borrow list because it is in short supply or because of the stock's volatile price.

Compared to securities on an easy-to-borrow list, hard-to-borrow securities almost always come with more fees for access to the securities.

Special Considerations

The easy-to-borrow list offers no information as to whether a security is over- or underpriced, as opposed to other recommendation lists that brokers keep, but rather, it's a measure of anticipated liquidity, or availability, for potential short sellers. Securities that are on the easy-to-borrow list, in addition to being easier to short, usually have lower transaction costs.

Brokerage houses with a deeper lineup or menu of services will often have a more extensive list of securities that are easy to borrow. Naturally, institutional investors, such as hedge funds, often seek near-immediate access to short sale opportunities, given the small window that is available for them to initiate their transaction.

Related terms:

Custody-Only Trading and Example

Custody-only trading is a system in which shares must be registered to the holder by name and can only be traded in physical form. read more

Float

The float is essentially double-counted money: funds within a financial or banking system that are briefly accounted for twice due to the time gap in processing deposits or withdrawals that are often in the form of paper checks. read more

Hard-To-Borrow List

A hard-to-borrow list is an inventory record used by brokerages to indicate what securities are difficult to borrow for short sale transactions. read more

Hedge Fund

A hedge fund is an actively managed investment pool whose managers may use risky or esoteric investment choices in search of outsized returns. read more

Liquid Market

A liquid market is one where there are many bids and offers and participants can easily enter and exit for minimal transaction cost. read more

Rebate

A rebate in a short-sale transaction is the portion of interest or dividends paid by the short seller to the owner of the shares being sold short. read more

Seller

A seller is any individual or entity, who exchanges a good or service in return for payment. In the options market, a seller is also called a writer. read more

Short Sale

A short sale is the sale of an asset or stock that the seller does not own. read more

Stock Loan Fee

A stock loan fee, or borrow fee, is a fee charged by a brokerage firm to a client for borrowing shares.  read more

Stock Loan Rebate

A stock loan rebate is an amount of money paid by a stock lender to a borrower who has used cash as collateral for the loan.  read more