shorts - some securities can not be shorted
Author: MikeCaron
Creation Date: 5/29/2009 7:53 AM
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MikeCaron

#1
I am running into problems with my automated trade executions in Wealth-Lab which submits ShortAtLimit orders. Some securities can not be shorted a Fidelity, yet I can not find a way to distinguish ahead of time that it can not be shorted. This makes a differences in the back-testing results as well.

I believe ADRs can not be shorted at Fidelity, at least that seems to be the behavior. Plus there are other stocks that can not be sorted.

Today's rejects are: ACF, GNK, HL, JCG, MT, TSL

Yesterday's rejects were: AMSC, APWR, CAR, CHS, CREE, MPEL, MTL

Any suggestions on a way to filter out these stocks? Should this be part of the data associated with each stock? Would this behavior change over time (during only some dates the security does not allow short trades)?

I did play with AMSC or APWR yesterday pre-market and could not even short 1 share and I had plenty of buying power left.

The error I receive is "0: Error(s): Your order to sell short can not be accepted. The security is either ineligible to short, there are currently no shares available to short, or there are insufficient shares available to meet your request. Please revise your share quantity or contact a representative for additional detail."
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Eugene

#2
The shortable status varies from time to time and from broker to broker, because it ultimately depends on your broker's ability to borrow the security (even if the stock is OK for shorting by Regulation SHO). IMNSHO, therefore it hardly make sense for this property to be a part of SymbolInfo.

A generic recipe in this situation could be to get the broker's shortable stocks list and get it parsed by a function.
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MikeCaron

#3
I will follow up on obtaining the shortable stock list. However, since WLP is highly customized for just Fidelity trading, I would like to see a function that returns a flag indicating is shortable at Fidelity.
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Eugene

#4
Then please suggest it to your Fidelity rep.
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MikeCaron

#5
I talked to the Active Trader Services desk this morning and they said there is no master list of stocks that can or can not be shorted. I was told that this is a liquidity problem caused by too much demand and that there are pools (and Fidelity has worked with other vendors to increase the size of the pool at times) of shares but when these get consumed and the price is at extreme levels, it does not get refilled. Examples of this occurred last year with the financial sector.

One exception to the master list was when the Bush administration blacklisted some financial stocks from trading short for a limited period of time to stabilize the market.

I will be submitting an enhancement request for some sort of flag because this does skew simulation results significantly for short strategies.
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ss161

#6
other broker dealers publish files of shortable securities along with the rebate or fee associated with borrowing the shares. i'll pass on the request to fidelity as well.
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Cone

#7
While it may change frequently, there must be a shortable list available since you can see if there are shares available to short in AT Pro's Directed Trading workspace. However, there won't be a way to determine that "sometime in the past" X number of shares were available to short for the purpose of backtesting. For that, just stick to the highly liquid stocks for which it's likely that other Fidelity traders own, making it easy to borrow for shorting.