Short Selling

LYNX offers the possibility to take a position on declining share prices through short selling. This involves selling stocks that you do not own by borrowing them first. Please note that short selling is not available for all instruments, for example, shares with low liquidity or small market capitalization may not be shortable. Short selling is only possible in a margin account and carries significant risks.

Disclaimer
Please be aware that short selling involves a risk of unlimited loss, as there is no upper limit to how much the price of a security can increase. Additionally, margin requirements may be adjusted by the broker at any time, and you may be required to provide additional collateral on short notice. Given these risks, short selling may not be appropriate for all investors.

LYNX+

After selecting the trading instrument in the order ticket, choose Sell, specify the order type and quantity, and then click Send Order to submit it.

For detailed information also see the article Order Submission.

Open LYNX+

Trader Workstation

In TWS, click Order at the top left corner to open the order ticket. Enter the ticker, order type, and price. Choose Sell, define the details, and then click Transmit to submit the order.

For detailed information also see the article Order Submission.

How do I know which stocks I can short?

In TWS, you can check whether a stock is available to short via a special column:

Open Global Configuration under the Edit menu.
Go to Trading Tools > Quote Monitor > Default Layout.
On the right-hand side, select Market Data Columns, then choose Shortable Shares.
Add the column and confirm with OK.

What are the conditions for short selling ?

On the TWS platform you can check conditions for opening a short position. In the column Shortable Action you can find the various types of colour:

Light green: Short selling available, at least 1,000 shares.
Dark green: Short selling generally available, but currently no shares can be borrowed.
Red: Short selling not available for this instrument.

How to display current interest rates?

Once you opened the TWS platform, click Edit at the top left corner and than Global Configuration. Now there opens new window, click Trading Tools and than Quote monitor, and next Default layout. On the right-hand side of the column, select Market Data Columns. In the next Available Columns select Fee rates. Click Add and and confirm the changes by clicking OK at the bottom of the window. The column will appear on the platform with the current interest rates.

Attention: Remember that these are updated daily. Typically, these rates vary between 1 and 2 % per annum, but there are also cases where costs reach hundreds of % per annum! Therefore, if you have an open short position, we recommend that you regularly monitor changes in the cost of financing borrowed shares to avoid unexpected problems.

LYNX Trading App

After selecting a trading instrument, create a Sell order. At the bottom of the screen, swipe Preview Order, then confirm with Submit Order.

For detailed information also see the article Order Submission.

FAQ

Why are some shares not available for shortselling?

Not all shares are available for borrowing. This can be due to limited liquidity, lack of lenders, regulatory restrictions, or temporary market conditions. Exchanges or regulators sometimes impose restrictions during volatile periods. Corporate actions (like mergers or earnings releases) may also lead to restrictions:

Liquidity and Availability: Illiquid shares may not have sufficient lenders, so borrowing is not possible.
Regulatory Restrictions: Exchanges or regulators sometimes impose bans or restrictions on short selling during high volatility to maintain orderly markets.
Market Conditions: In exceptional situations, brokers or exchanges may suspend short selling temporarily.
Corporate Events: Around mergers, acquisitions, or earnings announcements, restrictions may apply to avoid potential manipulation.
Risk Management: Brokers and clearinghouses may limit access if the risks of maintaining a short position are considered too high.
Legal and Ethical Concerns: In some markets, stocks in certain sensitive industries may be restricted from short selling.
Market Maker Approval: For some securities, shorting depends on the approval of designated market makers.
Technical Factors: Shares held in specific accounts (e.g., retirement accounts) may not be available to short due to regulatory or account limitations.

Why was my position closed with short or no notice?

Short positions depend on the ability to borrow shares. If lenders recall their stock or supply becomes unavailable, the broker may need to close your position quickly. This is an inherent risk of short selling.

What happens in case of a dividend payout or other corporate actions?

In the context of short selling, dividend payouts and other corporate actions can have specific implications for both the short seller and the lender of the shares.

Dividend payout

If you are a short seller, you have borrowed and sold shares that you do not own. As a result, you are obligated to return the borrowed shares to the lender.
When a company issues a dividend, the value of the dividend is typically deducted from the company’s stock price. As the short seller, you are responsible for reimbursing the lender for the dividend amount.
This means you must pay the dividend out of your own funds to the lender of the shares.
Essentially, short sellers incur a cost equivalent to the dividend when holding a short position over the dividend date.

Other corporate actions (e.g., stock splits, mergers, spin-offs)

Similar to dividends, other corporate actions can affect the stock’s value and the short seller’s position.
For example, in the case of a stock split, if you are short a stock that undergoes a split, the number of shares you owe increases proportionally.
Such events may lead to additional obligations and require adjustments to your short position.
Before engaging in short selling, traders and investors should fully understand the risks and mechanics related to corporate actions.

Where on Activity Statement to check paid interest?

Once your activity statement has been generated in the Client Portal, any paid interest (such as borrow fees or dividend compensation) can be found under the Interest or Borrow Fee Details section.

What margin is required for shorting?

For accounts held with IBIE (EU clients):

A risk-based margin applies. This system evaluates your portfolio’s risk to determine margin requirements, offering greater leverage through more accurate risk modelling.
It calculates the potential maximum loss across a range of prices and volatilities.
Due to the complexity of this model, we recommend using a Paper Trading account to understand the impact of portfolio margining under various scenarios.

For accounts held with IBUK (UK clients):

Regulation T applies. This requires a deposit of 150% of the value of the short sale at the time of execution:

100% covers the full value of the short sale
50% is the additional margin requirement

Not sure where your account is held? Check the Legal Notes section of your Activity Statement or contact your local Service Desk.

What margin is required for shorting?

For accounts held with IBIE (EU clients):

A risk-based margin applies. This system evaluates your portfolio’s risk to determine margin requirements, offering greater leverage through more accurate risk modelling.
It calculates the potential maximum loss across a range of prices and volatilities.
Due to the complexity of this model, we recommend using a Paper Trading account to understand the impact of portfolio margining under various scenarios.

Source: Stock Margin Requirements | Interactive Brokers Ireland

For accounts held with IBUK (UK clients):

Regulation T applies. This requires a deposit of 150% of the value of the short sale at the time of execution:

100% covers the full value of the short sale
50% is the additional margin requirement

Source: Short Selling and Margin

Not sure where your account is held? Check the Legal Notes section of your Activity Statement or contact your local Service Desk.

Short Selling Collateral

To collateralise a stock borrow position, the industry convention requires a deposit based on the settlement price of the shares. This affects the cost of maintaining the short position.

USD	102%; rounded up to the nearest dollar
CAD	102%; rounded up to the nearest dollar
EUR	105%; rounded up to the nearest cent
CHF	105%; rounded up to the nearest rappen
GBP	105%; rounded up to the nearest pence
HKD	105%; rounded up to the nearest cent

For non-USD shares, the calculation differs depending on the local currency.

For U.S. Treasuries and corporate bonds, the collateral amount includes accrued interest.

You can view this adjusted value in the Borrow Fee Details section of your daily account statement.

Source : Why does the “price” on hard to borrow stocks not agree to the closing price of the stock?

Disclaimer:
The author’s remuneration is not directly or indirectly related to his/her viewpoints or ideas.
Neither do any other conflicts of interest apply in accordance with the policy around the conflicts of interests of LYNX.

The information on this webpage is neither considered as investment advice nor an investment recommendation. The page shows data that has been prepared by LYNX as general information / marketing information for private use by investors but is not intended as a personal recommendation of particular financial instruments or strategies and does not take into account the individual investor’s particular financial situation, investment knowledge and experience, investment objectives and horizon, or risk profile and preference.

The investor must particularly ensure the suitability of an investment as regards to his/her financial and fiscal situation and investment objectives. Trading in financial instruments involves a substantial risk of loss and is not suitable for every investor. You should not engage in these financial instruments unless you fully understand the nature of the transactions you are entering into and the extent of your exposure to loss. The provided information is without transaction costs. Historical considerations and predictions are not a reliable indicator of future developments. The facts presented in relation to product information are provided for illustrative purposes and do not permit any formulations about future profits or losses.

LYNX may have taken the information in this marketing communication from sources that are considered reliable, without, however, assessing all such information. Accordingly, LYNX makes no representations or warranties as to the accuracy, completeness, or correctness of the information or opinions expressed herein.

The valuation of these financial instruments may fluctuate. Investors may lose more than their initial investment.

Be aware that:

the figures in this communication refer to the past and that a past performance is not a reliable indicator of future results.
the return may increase or decrease as a result of currency fluctuations when the indication relies on figures denominated in a currency other than that of the Member State in which the retail client or potential retail client resides.
where the indication is based on gross performances, commissions, fees, or other charges are applicable, and can be found on the webpage of your local LYNX branch.

Trading on margin can significantly increase risk. Ensure you understand the terms and costs before activating a margin account.

Margin products are complex and carry a high risk of losing money rapidly. Carefully consider whether you understand how margin works and whether you can afford to take the high risk of losing your money.

Show full disclaimer