Settlement & Maintenance of Short Sales
Most equities have a three-day settlement period from the time a trade executes. This means that the actual trade – the exchange of shares for cash – will take place three days after the trade executes, on the settlement date. The settlement date is especially important for short sale trades. If the number of shares available on the settlement date is less than the number of shares you have shorted, a forced buy-in may be applied to your account. At any point forward, if shares are no longer available to maintain your short position, a forced buy-in may occur.
Maintaining a Short Sale
Like all borrowed assets, the shares borrowed in a short sale are subject to an interest charge called the short sale rebate fee. The short sale rebate fee is determined by the availability of the shares you're borrowing and may be charged throughout the time you hold the short position. At the end of each day, any accrued borrow fees will be applied to your account. To learn more about this, read “Short Sale Rebate Fee.”