Market mechanics
What is locate requirement when attempting to short a hard-to-borrow stock?
By Easy Money Scanner · Educational reference · Not investment advice
The short answer
A locate is the requirement under Regulation SHO that a broker confirm shares are reasonably available to borrow before accepting a short sale order, preventing naked short selling of hard-to-borrow securities.
How it works
Hard-to-borrow stocks often carry elevated borrow fees and limited share availability, and brokers may restrict or deny short sale orders entirely if a locate cannot be secured at a reasonable rate.
An example
A trader wanting to short a heavily shorted small-cap may find their broker charges a high daily borrow fee or refuses the trade due to locate scarcity.
Risk & limitations
Borrow fees on hard-to-borrow shares can accrue daily and erode profits even if the stock price moves in your favor.
Examples are hypothetical, not trade recommendations. US contract and regulatory references do not automatically apply in Canada. Rules, margin requirements and broker policies can change; confirm them with the relevant authority and your broker.