Easy-to-Borrow List Definition & How it Effects Active Trading

Easy to Borrow List Definition

The easy-to-borrow list is the securities which are available for short selling activities.  In order for a stock to be on the easy-to-borrow list, the security must have a large number of outstanding shares in order to assure there will be stock on hand to handle the short position.  Each brokerage firm will maintain their easy-to-borrow list on a daily basis.  Stocks will move in and out of the easy to borrow list based on the availability of the stock. 

How Does the Easy-to-Borrow List Effect Trading

The easy-to-borrow list is something that few traders pay attention to on a daily basis.  But this list is a key to successful system trading.  When a trader develops a system, there are a number of factors which go beyond simply buying and selling the security.  I can speak from a personal example, where we at mysmp.com developed an extremely successful system for trading financial stocks over the course of 2008.  Then the government came out and adjusted the short selling rules on these stocks so we were no longer able to carry any short positions.  So, overnight an extremely successful system was no longer worth anything, because we were no longer able to make money on these stocks during the decline.  We are fairly diversified in our trading activities, but what if this was our sole operation.  The fact that these stocks were removed from the easy-to-borrow list, could have easily taken food off our families table. 

Example of Easy-to-Borrow List

Below is an example of an easy-to-borrow list from TradeStation.  Notice how the firm details there are 8,533 stocks on the list with further details of which stocks were added and removed from the list in the past 24-hours.

Tim Ord
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