Do intraday shorts pay interest?

[ScroogeMcDuck]

The broker has till T+2 to locate shares if the trader holds the short overnight. For an intraday short and cover, they do not need to.

I spoke to @def about having an opt-in where the trader authorizes the broker to close all short positions at the end of the regular trading hours. This move is technically within the rules and doesn't need shares to be located before shorting. I'm unsure if IB is considering such a move. If they do, other brokers might follow suit.

It's possible that trading could be halted near EOD and prevent closing it out. But supposing they start liquidating 30min early the chance of that happening is extremely low. And they still have 2 days to locate before a fail to deliver. Is there any broker that allows this?

 

[ScroogeMcDuck]

Because the broker doesn't know if you are holding the short position overnight or simply closing it out on the same day.

Moreover, the trade must be settled, whether it was closed out on the same day or not. If brokers don't locate the shares in case of intraday shorting and covering, then this essentially becomes naked shorting, which is banned.

If you buy and sell the same amount intraday, there's nothing to settle on T+2, if I'm interpreting this correctly?
https://www.dtcc.com/clearing-services/equities-clearing-services/cns

 

[qaz]

It's possible that trading could be halted near EOD and prevent closing it out. But supposing they start liquidating 30min early the chance of that happening is extremely low. And they still have 2 days to locate before a fail to deliver. Is there any broker that allows this?

No brokers that I know of. Waiting for a broker to take the lead. If it happens, that would be another milestone in trading similar to the introduction of fractional shares.

 

[zdreg]

The broker has till T+2 to locate shares if the trader holds the short overnight. For an intraday short and cover, they do not need to.

Every short sale needs a locate before entering the order. The broker doesn't have have to borrow the stock if you close it on the same day. It saves a lot of paperwork. Again, you still have to make the locate before entering the order, which means that you have the ability to borrow the stock when and if necessary.

 

[ScroogeMcDuck]

So it seems like there'd be a market for a locate-mill to rubber stamp every locate request, if the requestor contractually agrees to close every short position before 4pm and never actually borrow anything. In the 0.000001% of cases where they need an actual borrow, the locate-mill will have some small percentage of the shares set aside for actual borrows at an exorbitant fee.