What it is:
A hard-to-borrow list outlines the securities that a brokerage house cannot provide to investors for short selling.
How it works (Example):
Similar to goods and services, financial instruments exist in a limited supply, and some are less available than others. A brokerage house publishes a hard-to-borrow list that catalogs those securities it is unable to provide for short selling because of their extraordinarily limited supply. Clients may assume that securities not on the list are available to borrow for short selling.
For example, suppose stock XYZ appears on a brokerage house's hard-to-borrow list. This means that the brokerage house will not provide borrowed units of stock XYZ for clients who want to short the stock.
Why it Matters:
A hard-to-borrow list provides security availability in an up-front manner that allows clients to alter their trading and investment strategies where necessary. Though clients can almost always short sell securities not appearing on this list, they should still always confirm that the borrowed units have been properly delivered.