When a stock is sold short, a clearing firm must locate and borrow the shares. If there's a high demand to short a stock compared to its available shares, it's deemed hard-to-borrow. Market forces that increase demand for shorting a stock change daily based on specific circumstances.
According to Regulation SHO (RegSHO) Rule 204, short positions must have locatable shares, meaning they can be borrowed. Under this rule, our clearing firm, Apex, may force-close a short position if they can't continue borrowing the shares. This forced buy-back would occur at the next market open if the stock remains hard-to-borrow.
Consequently, fees for hard-to-borrow stocks can fluctuate significantly since they depend on daily market demand. Firstrade typically doesn't permit online short sales of hard-to-borrow stocks.
Note: Some stocks may not be labeled as hard-to-borrow yet still incur fees when sold through the platform. This happens when a stock is locatable but has limited shares available, necessitating a borrowing fee. In such instances, investors face daily fees for as long as the stock has a borrowing fee. These fees can be imposed at any time after the initial short sale, varying with the shares' availability.