Flag stocks likely to be hard to borrow, using SEC settlement-fail and Reg SHO data as a proxy since real securities-lending rates aren't licensed to us
Flags stocks that are likely difficult or expensive to short, inferred from public SEC data rather than a real securities-lending feed (we don't have licensed access to actual borrow fees or lender availability). It reads Fails-to-Deliver volume as a share of float and Reg SHO regulatory-threshold membership. Each ticker is labeled easy to borrow, moderate, or hard to borrow, and a hard-to-borrow read raises a watch. Treat it as a directional proxy for short-side crowding, not an actual fee quote or availability count.
The securities-lending market - inferred from settlement data rather than observed, which is a substitution worth understanding in full.
HOW SHORTING ACTUALLY WORKS. To sell short, a trader first BORROWS the shares, typically from a broker drawing on custodial inventory. You pay a borrow fee for that, post collateral, and can be RECALLED at any time if the lender wants the shares back - which forces you to close at a moment not of your choosing. So a short position carries a financing cost and a funding risk that a long position does not.
WHAT THE BORROW FEE MEANS. It is a price set by supply and demand for the loan. Most large stocks are GENERAL COLLATERAL, borrowable at a nominal rate. A stock in heavy demand with limited lendable supply becomes HARD TO BORROW, and its fee can reach tens of percent annualised - occasionally more. That fee is a genuine, observable measure of how difficult a position is to establish and hold, and it appears in the academic literature as one of the better-documented limits to arbitrage: expensive-to-borrow stocks have tended to underperform, which is read as evidence that constraints on shorting let overvaluation persist.
WHAT THIS ANALYSIS HAS INSTEAD. No licensed lending feed, so it infers difficulty from SEC fails-to-deliver as a share of float and from Reg SHO threshold membership.
WHY THE INFERENCE IS INDIRECT. A fail is a settlement event - the seller did not deliver on time - and it can arise from operational error, from a long sale, or from market-making activity, none of which is about borrow scarcity. The chain of reasoning runs: shares hard to locate, therefore more delivery failures, therefore elevated fails. Each link is plausible and none is tight, so elevated fails suggest difficulty without measuring it.
REG SHO THRESHOLD MEMBERSHIP is the firmer input, because it is a published bright-line test: fails of at least 10,000 shares and at least 0.5% of shares outstanding for five consecutive settlement days. Membership is a fact, not an estimate.
WHY BORROW COST MATTERS EVEN IF YOU NEVER SHORT. It is a measure of DISAGREEMENT and of constraint. A stock nobody will lend cheaply is one many people want to bet against and cannot easily - which is information about the security, whichever side you are on.
The difficulty labels are our own convention, and this is a stated proxy rather than a borrow-fee measurement.
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