Which broker allows equities shorting?

[mickmak]

Hi,

I am more familiar with derivatives side of the business, so all you equities side folks please chime in.

I am looking to pairs trading in dollar neutral setup. Any equities brokers that allow intra day shorts (stocks, funds, etc)? I am not carrying overnight.

Many thanks

mm

 

[total_keops]

Most of them if not all. You only need a margin account. Each broker has is own requirement for margin (there are rules they must follow).
Interactive Brokers is the most popular.

 

[mickmak]

Hi,

I looked into IB's short selling descriptions. It seems there is quite a bit of footnote around borrowable stocks, etc. If I need to execute my shorts fast, can IB handle that or will it be a "high" touch order with some dude making sure the stock is borrowable, etc?

I am curious if IB shorting is as simple as futures side where with a click of a button, you are on the short side of a trade (where your account is deducted the margin requirement by the exchange + broker-if any).

Thanks
mm

 

[ASE1245]

Quote from mickmak:

Hi,

I looked into IB's short selling descriptions. It seems there is quite a bit of footnote around borrowable stocks, etc. If I need to execute my shorts fast, can IB handle that or will it be a "high" touch order with some dude making sure the stock is borrowable, etc?

I am curious if IB shorting is as simple as futures side where with a click of a button, you are on the short side of a trade (where your account is deducted the margin requirement by the exchange + broker-if any).

Thanks
mm

No, not like shorting futures. If you want to short a security in a margin account, and it's on the 'easy to borrow' list, you can just enter an order to sell short. If not, the security is considered 'hard to borrow' and requires you to ask for a locate. If you receive a locate on that security, then you can short it. I recommend to my clients to get locates on hard to borrow securities before the open,so they are prepared. If they choose to sell short a hard to borrow security they could not anticipate before the open, they have to request the locate and wait for a response from the broker. Having an account at a clearance firm with good access to locates and a broker willing to work quickly on your behalf helps.

Bob

 

[mickmak]

Hi Bob,

Thanks for the explanation. Based on your experience, how quickly is a short order executed if it is on the "shortable list"? Have you seen significant slippage (like in the >1 minute) range for an order to be executed?

thanks
mm

 

[ASE1245]

Quote from mickmak:

Hi Bob,

Thanks for the explanation. Based on your experience, how quickly is a short order executed if it is on the "shortable list"? Have you seen significant slippage (like in the >1 minute) range for an order to be executed?

thanks
mm

Selling short in normal market conditions will have no more delay than sell long or buying a security. Normally a fraction of a second. Even with that, the flash crash is a reminder to always use limit orders, in my opinion.

 

[total_keops]

Quote from mickmak:

Hi Bob,

Thanks for the explanation. Based on your experience, how quickly is a short order executed if it is on the "shortable list"? Have you seen significant slippage (like in the >1 minute) range for an order to be executed?

thanks
mm

As said, most stocks are shortable as fast as a long trade. There is no extra delay for a short. It is a good practice to execute the short first in a pair trade. This is written in the introduction books (Handbook of pairs trading, ...).
Hard to borrow are usually penny stocks or special situations when the whole street is short and there are no more stocks the broker can loan for you. But even penny stocks have a lot of shares available. For most "pairable" stocks this will not be an issue.