Securities and Exchange Commission

March 12, 2025

Securities and Exchange Commission

100 F Street, NE

Washington, DC 20549

PETITION FOR RULEMAKING UNDER THE SECURITIES EXCHANGE ACT OF 1934

Petition to Amend Regulation SHO to Require Pre-Borrows for All Short Sales, Impose Fees for

Fails-to-Deliver, and Eliminate Market Maker Exceptions

To the Securities and Exchange Commission:

Pursuant to Section 10 of the Administrative Procedure Act (5 U.S.C. § 553(e)) and Rule 192(a)

of the Commission’s Rules of Practice (17 CFR § 201.192(a)), we hereby petition the Securities

and Exchange Commission (SEC) to amend Regulation SHO (17 CFR Part 242, Rules

200–204) to address persistent failures in short sale regulation and trade settlement. After

twenty years, Regulation SHO has failed to eliminate naked short selling and large, persistent

fails-to-deliver (FTDs), undermining investor confidence and market integrity. Attached to this

petition is a draft paper (Welborn, 2025) that provides a comprehensive analysis of Reg SHO

Threshold Lists and FTD data from 2005 to 2024. The persistence of FTDs—peaking at $19.8

billion in September 2024—reflects structural flaws in the current regulatory framework,

including inadequate penalties, loopholes for market makers, and reliance on unenforceable

"reasonable grounds" standards for short sales. This undermines confidence in markets and

represents a systemic risk. Based on this analysis, we propose three specific amendments to

Reg SHO: (1) mandate a pre-borrow requirement for all short sales, (2) impose monetary fees

or fines for FTDs, and (3) eliminate all market maker exceptions to locate and close-out rules.

Background and Rationale

Regulation SHO, enacted in 2005, aimed to standardize short selling rules and curb naked short

selling—sales executed without locating or borrowing shares—and resultant FTDs. The

attached research, detailed in "Reg SHO at Twenty" (Welborn, 2025), analyzes daily Threshold

Lists and FTD data from the National Securities Clearing Corporation (NSCC) over Reg SHO’s

history. Despite amendments in 2007, 2008, and 2009, including the elimination of the options

market maker exception, naked short selling persists. As of 2024, dozens of companies remain

on the Threshold List, with average daily FTDs at $2.9 billion—unchanged from 2005—and

peaks exceeding $19 billion in September 2024. Some companies have been on this list for

hundreds of days in a row throughout 2023 - 2024. High-profile events like GameStop in

January of 2021 (and several subsequent large price movements) and Robinhood’s 2025 $45

million fine for Reg SHO violations underscore these inadequacies.

As such, we are petitioning for the following changes to be made to Reg SHO:

1.​ Mandatory Pre-Borrow for All Short Sales​

The current "locate" requirement (Rule 203(b)) allows short sales if a broker-dealer

has "reasonable grounds" to believe shares can be borrowed, a standard easily

circumvented. Data from the SEC’s 2008 Emergency Order, requiring pre-borrows for

19 financial stocks, showed significant reductions in FTDs without harming market

quality (OEA, 2009). A universal pre-borrow mandate would eliminate ambiguity,

ensuring shares are secured before sale, reducing naked shorting, and aligning with

the SEC’s 2008 findings.

2.​ Fees or Fines for Fails-to-Deliver​

Reg SHO lacks punitive measures for FTDs, a flaw evident since the SEC dropped

monetary penalties from its 2003 proposal despite public support (SEC, 2004).

Consequently, daily FTDs have remained entrenched, with threshold securities like the

SPDR S&P Retail ETF (XRT) accumulating 1,691 threshold days and short interest

exceeding 699% of shares outstanding (Welborn, 2025). The U.S. Treasury market’s

"fails charge" since 2009 demonstrates that fees incentivize timely settlement,

reducing fails even in low-rate environments without impairing market liquidity (NY

Fed, 2020). Applying fees or fines to FTDs in equity markets would deter intentional

delays and fund enforcement, addressing the $2.9 billion daily FTD average

documented in the attached research (Welborn, 2025).

3.​ No Exceptions for Market Making​

Rule 204’s close-out exceptions for "bona fide" market making (e.g., T+6 versus T+4

for others) enable persistent FTDs, particularly in ETFs, which now dominate

Threshold Lists (OEA, 2011). Enforcement actions against firms like Arenstein (AMEX,

2007) and Wolfson (SEC, 2012) reveal abuse of such exceptions. Eliminating them

would ensure uniform accountability, as the supposed liquidity benefits do not justify

the systemic risks of unchecked FTDs, evidenced by ETF FTDs reaching 90% of daily

fails on some days (Bradley et al., 2011). OEA’s 2009 study found no adverse liquidity

effects after the elimination of the OMM exception. Bid-ask spreads for affected stocks

narrowed by 12%, while trading volumes remained stable (OEA, 2009). These results

align with Paul Atkins’ 2012 critique of regulatory carveouts: "Exceptions for ‘bona fide’

activities often become loopholes for abuse" (WSJ, 2012).

Request for Action

We urge the SEC to initiate rulemaking to amend Regulation SHO as follows:

●​ Rule 203: Require all short sales, without exception, to be backed by a confirmed

borrow of securities prior to execution.

●​ Rule 204: Impose escalating monetary fees or fines for FTDs, applicable to all market

participants, with proceeds supporting enforcement.

●​ Rule 204: Eliminate all market maker exceptions to locate and close-out requirements,

ensuring uniform settlement timelines.

These changes address Reg SHO’s mixed legacy, supported by two decades of data showing

persistent FTDs and enforcement gaps. They align with the SEC’s mandate under the Securities

Exchange Act of 1934 to maintain fair and orderly markets (15 U.S.C. § 78b). I respectfully

request the Commission publish this petition for public comment and act promptly to restore

trust in U.S. equity markets.

Respectfully submitted,

Dave Lauer

Co-Founder

Urvin Finance and We The Investors

John W. Welborn

Senior Lecturer

Dartmouth College

Attachment A: “Reg SHO at Twenty” by John Welborn (March 12, 2025)

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Reg SHO at Twenty°

John W. Welborn⃰

Department of Economics, Dartmouth College, Hanover, NH 03755

This Draft: March 2025

__________________________________________________________________

Abstract

Regulation SHO (“Reg SHO”) was enacted by the Securities and Exchange Commission in 2004

to address concerns regarding so-called naked short selling and large and persistent trade

settlement failures. Reg SHO was also designed to bring consistency, transparency, and fairness

to short sale rules that varied across the major stock exchanges. This paper is the first

comprehensive analysis of the impact and efficacy of Reg SHO at reducing naked short selling

and fails-to-deliver (FTDs) over its twenty-year history. I use daily Regulation SHO Threshold

Lists and FTD data for the period from the start of Reg SHO in 2005 through the end of 2024,

together with academic and proprietary databases, to document the composition and magnitude

of high FTD securities. I conclude that the Reg SHO legacy is mixed and further reforms are

necessary to ensure investor confidence in markets.

JEL Classification: G11; G12; G14; G21; G28; K22

Keywords: fail-to-deliver; Regulation SHO; short selling; Securities and Exchange Commission;

short interest

__________________________________________________________________

°I am grateful to Jackson Easley for invaluable research assistance and data cleaning.

*Corresponding author. Tel.: +1 (603) 646-1110.

Email address: john.w.welborn@dartmouth.edu (J. Welborn).

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1. Introduction

The year 2025 marks the 20-year anniversary of SEC Regulation SHO (“Reg SHO”), which

governs short selling and trade settlement in US stock markets. Reg SHO was proposed by the

SEC in January of 2004, approved in October 2004, and enacted in January 2005. Formally, Reg

SHO comprises SEC Rules 200 through 204 in the Federal Register (17 CFR Part 242).

Reg SHO standardized short selling rules and addresses concerns about “naked” short selling

and unsettled trades known as fails-to-deliver (FTDs). Prior to Reg SHO, the NYSE and Nasdaq

listing exchanges had their own rules concerning short selling and trade settlement. Reg SHO

was designed to regulate the different standards. Reg SHO was also written to address concerns

about naked short selling that emerged during the Dot Com boom and bust of the early 2000s.

Reg SHO’s legacy is mixed. The final rule, enacted in 2005, contained a series of regulatory

loopholes that were abused by dishonest market participants to naked short sell and fail to

deliver. Moreover, the final rule draft eliminated an initial proposal for monetary penalties for

failing to deliver. Reg SHO also did not require any disclosure about which firms were failing to

deliver and to what extent. As a result, thousands of companies experienced large and persistent

fail-to-deliver positions worth billions of dollars during the period from 2005 through 2008.

The SEC amended Reg SHO in 2007, 2008 and 2009 to address key loopholes and reduce

naked short selling and FTDs. Due to these changes, after 2009, the number of companies

experiencing persistent naked short selling declined, as did the aggregate dollar value of fails-todeliver. The SEC and FINRA also brought a series of high-profile enforcement cases which

revealed the extent to which Reg SHO was manipulated, particularly the so-called options

market maker (OMM) exception.

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Nevertheless, these Reg SHO reforms and enforcement actions reduced but did not

eliminate naked short selling and FTDs. Dozens of public companies are currently on the Reg

SHO Threshold List, which is a list of firms with large and persistent FTD positions. The average

daily dollar value of FTDs is just under $3b and is relatively unchanged from 2005. A related

mystery is why so many Threshold List tickers are exchange traded funds (ETFs).

Reg SHO’s inadequacies are further revealed by the fact that certain companies remain

on the Threshold List for hundreds of trading days, including the S&P 500 Retail ETF (XRT) and

GameStop (GME). A related and unresolved regulatory challenge emerges when the same stock

is re-lent multiples times through short sales, a process known as “chained lending” or

“rehypothecation.” To wit, the XRT short interest is often over 100% of shares outstanding.

At the 20-year anniversary of Reg SHO, I explore concerns about naked short selling and

large and persistent FTDs. I also evaluate the merits of the following proposals: (1) A mandatory

pre-borrow requirement for all short sales; (2) Monetary penalties for failing to deliver; and (3)

Elimination of all market making exceptions to timely settlement rules.

A critical research challenge is the quality and accessibility of data related to Reg SHO. Daily

Regulation SHO Threshold Lists are provided directly by the exchanges, and these data files are

both incomplete and missing unique CUSIP identifiers. In contrast, FTD data from the National

Securities Clearing Corporation (NSCC), available through the SEC Freedom of Information Act

(FOIA) office, are complete historically and contain sufficient identifying information.

In the analysis below, I begin with a history of short selling and trade settlement regulations.

I then explore the data on naked short selling, the Reg SHO Threshold Lists, and fails-to-deliver

that I can reconstruct from academic and proprietary data sources. I close with a discussion of

the three policy proposals that may help to address ongoing settlement failure challenges

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2. Short Selling

Short selling is a trading strategy that profits when asset prices decline. In a typical short

sale, an asset is borrowed and sold with the expectation that it can be repurchased later, at a

lower price, for return to the lender. Short selling is legal and (generally) helps to ensure market

liquidity and efficient price discovery by moderating asset prices. There are many reasons why a

trader may choose to sell short, including hedging and speculating. There is no meaningful way

to differentiate between hedging and speculating from publicly available short sale data.

In securities markets, a naked short sale occurs when a short seller does not locate or

borrow shares prior to effecting a short sale. If the naked short seller does not borrow stock by

settlement date, then a trade settlement failure may occur. Naked short selling is generally

illegal, but there are exceptions, and the regulation of short selling is complex.

The fundamental challenge of analyzing short selling in modern securities markets is

there are layers of financial intermediaries that separate stock lenders and stock borrowers. Stock

is held in various account types at myriad institutions throughout the financial landscape. Often,

stock lent to short sellers is done without the knowledge of the beneficial owner. As a result,

there is no self-regulating mechanism to address trade settlement failures when they occur.

Previously, short selling was rare and a small fraction of total trading volume. This

changed in the 1990s with the advent of prime brokerage, which was a novel institutional service

offered by new class of investment funds to high-net-worth investors (SEC 1994). As the name

implies, “hedge” funds seek to maximize returns while limiting risk, which necessarily involves

hedging and shorting via stocks and options. Since that time, the quantity of short selling has

only increased, and is arguably just as common as long trading today in most markets.

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The act of borrowing securities from one party, and selling them to another, is a complex

multiparty transaction. Short selling is also complicated by the fact that trade settlement is not

instantaneous. Stock transfers are delayed by layers of trade netting within the brokers and at the

clearinghouse. Net settlement increases efficiency but reduces accountability insofar as failed

trades are not traceable to their origin. Settlement failures are documented as anonymous debits

at the clearinghouse, and counterparties have neither the information nor the incentive to force

settlement. Oversight of prompt and accurate trade settlement falls to securities regulators and

self-regulatory organizations (SROs) such as the major stock exchanges.

2.2 Short Selling and the Securities Exchange Act of 1934

The Securities Exchange Act of 1934 was motivated by a desire “to ensure the

maintenance of fair and honest markets” (73rd Congress, 1934, p. 881). There is evidence that

manipulation of the stock issuance process contributed to the market volatility that preceded the

1929 stock market crash (Flynn, 1934). The 1933 Pecora Investigation, which led to creation of

the SEC, concluded that stock “pool” operators had used “unsavory and unethical methods

employed in the flotation and sale of securities” to manipulate stock prices (Fletcher, 1934).

There is anecdotal support for the Pecora Commission’s claims. At the turn of the

century, the stock speculator Daniel Drew battled with Cornelius Vanderbilt over control of the

Harlem and Erie Railroads by issuing unregistered securities and selling short stock that he had

not borrowed. Drew famously quipped, “He who sells what isn’t his’n, must buy it back or go to

pris’n” (White, 1910, p. 3). Similarly, Alan Ryan, Chairman of Stutz Motor Car, battled with socalled “bear raiders” who sold millions of Stutz shares that they had not borrowed or did not own

(Brooks, 1969).

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Drew and other stock speculators of the era understood that trade settlement is not

instantaneous. In markets for fungible goods like stock, trade is often facilitated by a clearing

house that anonymizes the buyer–seller relationship. This intermediation encourages efficiency

and liquidity because the clearinghouse reduces transaction times and assumes counterparty risk.

Such intermediation, however, may reduce transparency and accountability. Trade settlement

failures can occur as a result. Short selling may exacerbate settlement problems because short

sellers do not own the stock they sell. The 1934 Act did not, however, specifically address

problems associated with naked short selling or trade settlement.

2.3 The Wall Street Back Office Crisis

The “Back Office Crisis” of the late 1960s compelled Wall Street firms and the SROs to

address trade settlement problems. Starting in the summer of 1967, the volume of trading on the

New York Stock Exchange (NYSE) and the American Stock Exchange (AMEX) far exceeded

the capacity of brokerage firms’ clerical staff to process related paperwork. This paperwork

backlog was serious enough that at least one brokerage firm was forced to close. By January

1968, aggregate trade “fails” had increased by 93 percent (Columbia Law Review, 1969).

Securities regulators voiced their concerns publicly. SEC Commissioner Hugh F. Owens

remarked that the “fails situation” could cripple market liquidity and “seriously threaten our

whole economy” (Owens, 1968). A February 1969 memo to Ken Cole, President Nixon’s aide,

from Paul W. McCracken, Chairman of President Nixon’s Council of Economic Advisors, shows

that concerns reached the Executive level. McCracken writes, “It is our judgment that there is a

substantive problem here…I recommend that we have a discussion of the matter at a meeting of

the Cabinet Committee on Economic Policy” (McCracken, 1969).

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To address the crisis, the exchanges closed every Wednesday, and settlement was

extended to trade date plus five days (“T+5”). Securities dealers at the time considered a range of

solutions to the back-office problem that would penalize firms who fail. In a “mandatory buyin,” a broker with a fail-to-receive (FTR) must, rather than waiting for delivery, buy stock at the

current market price and bill the owing firm for the shares not delivered. Another solution would

impose net capital penalties on broker–dealers with outstanding fails. A third proposal would

have severely limited the trading abilities of firms with high fails (Columbia Law Review, 1969).

These proposed punitive solutions did not address the main cause of the backlog, which

was direct settlement in paper certificates. To address inefficiencies associated with paper

settlement, NYSE members founded the Central Certificate Service (CCS) in June of 1968. The

CCS had two clear advantages over paper settlement. First, the CCS held all stock certificates in

a central location and noted ownership transfers using book entries. Second, the CCS automated

the trade clearing process electronically with punch cards. Nevertheless, participation in the CCP

was voluntary and success was initially limited (Benn, 2002). Eventually, wider CCS

participation led to creation of the Depository Trust Company (DTC) in 1973 (DTCC, 2012).

In the Securities Act Amendments of 1975, Congress required universal adoption of

“immobilization” in the clearing system. By ending the practice of physical certificate transfer,

the Amendments were designed “to foster the development of a national securities market

system and a national clearance and settlement system” (94th Congress, 1975). The National

Securities Clearing Corporation (NSCC) was founded in 1976 to provide clearing, settlement,

and central counterparty risk services. While physical stock was held “immobilized” in the DTC,

the NSCC aggregated order flow and generated instructions for net changes in DTC accounts at

the end of each trading day through a process known as “multilateral netting” (Donald, 2007).

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2.3 United States v. Naftalin (1979)

Though efficient, multilateral netting did not prevent fraud and market manipulation, as

was evident in the 1979 SCOTUS case United States v. Naftalin. In 1971, the SEC ordered

public hearings against Naftalin and Company, Inc., a registered broker–dealer, and its president,

Neil T. Naftalin. The SEC alleged that Naftalin executed sell orders for stock that he did not own

and could not deliver to a counterparty, Merrill Lynch, Pierce, Fenner and Smith.

In 1973, an administrative law judge found that Naftalin committed fraud by executing

long sales of stock that were short sales and delayed settlement indefinitely under false pretenses.

Naftalin’s conduct was revealed when the prices of the securities involved began to rise, at which

time he notified the counterparties that he could not make delivery. For the broker–dealers

waiting for delivery from Naftalin, the cost of buying-in securities on the open market to settle

the trades was over $1.2 million. Naftalin’s registration as a broker–dealer was revoked, and he

was barred from the securities industry for life (SEC, 1973).

Naftalin was convicted in United States District Court for the District of Minnesota on

eight counts of employing a scheme to defraud in the offer or sale of stock in violation of section

17(a)(1) of the Securities Act of 1933 and sentenced to five years imprisonment. Naftalin

appealed the District Court’s decision on the grounds that the fraud had occurred between

brokers and not investors whom the 1933 Act was designed to protect. The United States Court

of Appeals, Eighth Circuit, agreed and vacated the District Court Decision (8th Circuit, 1972).

In 1979, the U.S. Supreme Court agreed to hear United States v. Neil T. Naftalin. The

Supreme Court found that section 17(a)(1) of the 1933 Act applied to brokers and investors alike

and reversed the Appeals Court decision. The criminal conviction against Naftalin for

fraudulently selling short and intentionally failing to deliver stood.

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2.4 Continuous Net Settlement and the Pollack Report

The 1970s settlement institutions were designed to eliminate the costs and risks from

lengthy delivery failures like those uncovered in the Naftalin case. Every day, NSCC aggregates

trade data and provides electronic settlement instructions to the Depository Trust Clearing

Corporation (DTCC). The NSCC organizes this process through the Continuous Net Settlement

(CNS) system. Through CNS, the NSCC effectively “steps in between two parties to a trade and

nets each party’s obligation to trade over multiple trades, so that each obligation to receive or

deliver, and an obligation to deliver or receive, can be combined together into one” (Sirri, 2007).

CNS helps to provide liquidity when there are occasional or temporary problems with

trade settlement. If a broker fails to deliver stock by T+3, the NSCC allocates that FTD to a

different broker–dealer using a random distribution algorithm. The DTC account that did not

receive securities because of this allocation will have a net fail-to-receive (FTR) position. The

broker who has failed to receive will nonetheless credit the securities positions to his customer

accounts. Additional liquidity comes from the Stock Borrow Program (SBP), which allows

NSCC firms to loan shares automatically from DTC accounts in the event of a CNS fail. CNS

and the SBP preclude identifying or tracking which specific brokers fail to deliver or receive.

The anonymity of CNS may open the settlement system to abuse by preventing

counterparties from self-regulating settlement failures. Regulators have voiced concerns

regarding CNS for decades. In 1985, the National Association of Securities Dealers (NASD)

commissioned Irving M. Pollack, a securities law expert and former SEC Commissioner, to

conduct a comprehensive review of short selling in NASDAQ securities. Pollack (1986)

concluded that better institutions were needed to guarantee prompt close-out of short sales.

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Pollack (1986) observed that, while CNS had substantially increased efficiency, the

system effectively insulated the clearing corporation and brokers from the costs associated with

FTDs and FTRs. Thus, CNS did not prevent FTDs and FTRs from increasing without limit and

permitted some brokers to postpone delivery indefinitely (Pollack, 1986, p. 50). Pollack (1986)

warned that FTDs and FTRs could therefore cause serious difficulties in a lengthy bear market.

“The fact that there is no automatic mechanism preventing the substantial buildup of short

positions at the clearing corporation and of fails to receive in brokerage firms carries the

potential for serious problems, particularly in the event of crisis market conditions (Pollack,

1986, p. 69). The phrase, “short positions at the clearing corporation” refers to fails-to-deliver.

2.5 SEC Regulation SHO

CNS’s inability to moderate FTDs became clear during the dotcom bust of the early

2000s. In 2003, the SEC requested comment on proposed regulations “to address the problem of

‘naked’ short selling” (SEC, 2003a). The SEC received comments from a wide range of market

participants, including industry professionals and retail investors (SEC, 2003b). The final short

sale rule, Regulation SHO, was passed in August 2004 and became effective in January 2005.

SEC Regulation SHO was designed to regulate short selling formally and reduce FTDs.

Regulation SHO requires the five major U.S. stock exchanges to publish a daily list, referred to

as the Regulation SHO Threshold List, of stocks with high FTDs. At the time, these exchanges

were the NASDAQ, NYSE, NYSE Arca, NYSE Amex, and the Chicago Stock Exchange

(CHX). To qualify for the Threshold List, a stock must have, for five consecutive settlement days

at a clearing agency, an aggregate FTD position totaling 10,000 shares or more and equal to at

least 0.5% of the issuer's total shares outstanding (SEC, 2004).

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Regulation SHO imposes locate and close-out requirements for short sales. The locate

requirement is satisfied if a broker–dealer has reasonable grounds to believe that a security can

be located (for borrow) prior to delivery date. A broker–dealer must document a locate prior to

executing a short sale. Specifically, the rule prohibits execution of a short sale unless a broker–

dealer has either borrowed the security or “has reasonable grounds to believe that the security

can be borrowed so that it can be delivered on the date delivery is due” (SEC, 2004). The closeout requirement obliges broker–dealers to settle FTD positions for threshold securities that have

persisted for 13 consecutive settlement days. Closing out requires the broker–dealer to purchase

securities of like kind and quantity and to settle the trade on behalf of the customer.

Regulation SHO was influenced by short sale rulemaking by the SROs. The “locate” and

“reasonable grounds” language above is borrowed from NASD Rule 3370 and NYSE Rule

440C, which predate Regulation SHO. The NYSE permitted use of an “Easy to Borrow” list to

satisfy the “reasonable grounds” standard that a security sold short was available for borrowing.

Note, however, that “repeated failures to deliver in securities included on an ‘Easy to Borrow’

list would indicate that the broker–dealer’s reliance on such a list did not satisfy the ‘reasonable

grounds’ standard” (NYSE 1997, p. 4662).

Similarly, the NASD required a member firm to make an “affirmative determination” that

stock sold short would be available to borrow by settlement date. The NASD approved use of a

so-called “Hard to Borrow” Lists to satisfy the affirmative determination requirement insofar as

“a specific security absent from the list is easy to borrow” (NASD 2000, p. 171). Furthermore,

Rule 3370 “was designed to prevent abusive short selling and ensure that short sellers satisfy

their settlement obligations” (NASD 2000, p. 171).

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NASD 3370 incorporated recommendations on the reporting and settlement of short sales

contained in a 1986 NASD study by former SEC Commissioner Irving M. Pollack. Pollack

(1986) concluded that, given the structure of the CNS system, it was possible for large FTD

positions to accumulate at the clearinghouse “in perpetuity.” “While these procedures generally

protect the clearing corporation, they permit short selling brokers to assume much larger

positions than they might otherwise be able to undertake if they were prevented from continually

rolling over short positions without borrowing securities for delivery” (Pollack 1986, p. 61).

2.6 Exceptions to Regulation SHO

Regulation SHO contained two loopholes that hampered the rules’ ability to reduce

settlement fails. First, the Grandfather Clause exempted all pre-existing FTD positions.

According to SEC Director of Market Regulation Erik Sirri, “Regulation SHO's grandfather

provision was adopted because the Commission was concerned about creating buy-side volatility

through short squeezes if large pre-existing fail to deliver positions had to be closed out too

quickly after a security became a threshold security” (Sirri 2007). The Commission proposed

eliminating the grandfather provision in 2006 and finalized its elimination in 2007.

Second, Regulation SHO contained an exception to the locate and close-out requirements

for short sales for market makers. Specifically, SEC (2004) allowed, “…[an] exception from the

uniform ‘‘locate’’ requirement, as Rule 203(b)(2)(iii), for short sales executed by market

makers...including specialists and options market makers, but only in connection with bona-fide

market making activities.” SEC (2003a) describes how the Exception was intended to mean that

all market makers were permitted to sell stock short without locating that stock

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Market makers act as temporary counterparties to buyers or sellers to foster liquidity.

Thus, market makers sometimes sell stock they do not have to hedge long positions. In general,

OMMs strive to offset long positions with short positions of similar magnitude and duration.

This is known as maintaining a “delta neutral” portfolio, where delta captures the sensitivity of

changes in options prices to changes in the underlying stock price. While most market maker

positions are closed out at the end of each trading day, OMMs take short positions that last until

an option contract expires, which may be weeks or months. Often, OMMs manage portfolios of

trades which require offsetting a book of long positions with short positions of similar magnitude

and duration. This is known as maintaining a “delta neutral” portfolio, where delta informs how

much of the underlying security must be bought or sold to hedge the options position.

NASD 3370 and NYSE 440C also contained limited short sale locate and close-out

exceptions for market makers engaged in bona fide market making, but the proposal to establish

Regulation SHO notes that “the SRO requirements [had] not fully addressed the problems of

naked short selling and extended fails to deliver” (SEC, 2003a). Thus, Regulation SHO did not

create a new exception per se. Rather, the rule was written to strengthen and narrow pre-existing

exceptions without disrupting legitimate market making activity. Regulation SHO was also

designed to “establish a uniform standard specifying the procedures for all short sellers to locate

securities for borrowing” (SEC, 2003a).

The Exception did not apply to stocks already on the Regulation SHO Threshold List; an

options market maker could only maintain FTDs “if the options positions were created prior to

the time that the underlying security became a threshold security” (SEC, 2004). Thus, all FTDs

in Threshold stocks are subject to the mandatory close-out requirement if they are older than 13

days and were not executed to hedge a pre-existing options position.

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According to the SEC (2007b), “The options market maker exception was created to

address concerns regarding liquidity and the pricing of options.” When OMMs sell put options or

buy call options they are in a long position. They can hedge their long options position by selling

short the underlying equity. The Exception allowed OMMs to hedge the risk of long options

positions for the duration of an options contract if unable to borrow, which allowed them to

delay short sale close-out until options expiration if necessary.

An example of this situation is when a market maker writes a put option with a future

expiration date (a long position for the market maker). The Exception allowed the market maker

to hedge that long position by shorting an equivalent quantity of the underlying stock and delay

delivery if unable to borrow. At option expiration, the put buyer either (a) sells stock back to the

market maker (which the OMM can use to settle his short hedge), or (b) the put expires out of the

money, and the market maker buys stock to settle the short hedge.

With hard to borrow securities, shorting is most costly because a short seller has to pay to

borrow the underlying equity in addition to posting collateral. Due to the Exception, OMMs did

not have to pay interest on short sales of stocks with negative rebates for the options contract

duration if unable to borrow. For contracts with expiration dates far in the future, this Exception

could result in large cost savings.

The SEC limited the Exception to bona-fide market making, which “does not include

activity that is related to speculative selling strategies or investment purposes of the broker–

dealer” (SEC, 2004). Further, “bona-fide market making does not include transactions whereby a

market maker enters into an arrangement with another broker–dealer or customer in an attempt to

use the market maker's exception for the purpose of avoiding compliance with [Regulation

SHO]” (SEC, 2004).

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While the Exception was written to promote legitimate hedging by market makers, some

traders were not engaged in bona-fide market making and were consequently fined and barred

from trading. In 2007, FINRA, acting on behalf of AMEX’s regulatory division, found that Scott

and Brian Arenstein, “who were not bona-fide options market makers, improperly utilized the

Reg SHO market maker location exemption to avoid locating shares prior to effecting short sale

transactions in Reg SHO threshold securities…[and] engaged in transactions that circumvented

delivery obligations” (AMEX 2007a, p. 2).

The Arenstein cases also alerted the SEC to a fraudulent trading strategy to “reset” the

settlement date for a failed trade. “Options market makers’ practice of “rolling” positions from

one expiration month to the next potentially allows these options market makers to not close out

positions as required by the close-out requirements of Regulation SHO” (SEC, 2007b, p. 22).

The Arenstein case caused the SROs to restate the existing requirement that all

exceptions were limited to bona-fide market making. For example, the Chicago Board Options

Exchange states that, “only options market–makers that are engaged in bona-fide options marketmaking may utilize the exception to Regulation SHO’s “locate” requirement when effecting a

short sale in the underlying security as a hedge” (CBOE 2007).

In August of 2007, the SEC proposed eliminating the Options Market Maker Exception

to Regulation SHO. “The ability of options market makers to sell short and never have to close

out a resulting fail to deliver position... may have a negative impact on the market for those

securities” (SEC, 2007b, p. 21). The SEC eliminated the Exception in September 2008. In the

final rule, the SEC wrote that, “[f]ails to deliver in threshold securities that result from hedging

activities by options market makers will no longer be excepted from Regulation SHO’s close-out

requirement” (SEC, 2008b, p. 1).

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The SEC (2009b, 2011, and 2012) and FINRA found evidence that the OMM abuse

continued. The Wolfson case, for example, documents how one options market maker,

…improperly utilized the Market Maker Exception to avoid locating shares before

effecting short sales as part of “reverse conversion” and “assist” transactions…

As a result, [Wolfson was] … able to attract the business of prime brokerage

firms seeking to create inventory for stock loans on hard to borrow securities.

(SEC, 2012, pp. 3–4)

This is important because hedge funds and large institutional investors often rely on

prime brokers to locate and borrow stock for short sales. Options market makers like Arenstein

and Wolfson executed complex options trades known as “reverse conversions” to generate stock

loan inventory for prime brokers. For this purpose, a reverse conversion does not qualify as

bona-fide market making. Rather, according to the SEC,

Reverse conversions are executed to meet a one-sided demand for hard-to-borrow

threshold securities. The buyers of the threshold securities, in this case large

prime brokerage firms, engaged in the conversion transaction that allowed them to

acquire a long stock position that is hedged by the synthetic short options

position. The brokerage firm could then loan out the shares of the threshold

securities and received fees from the borrowers. Those loan fees can be quite

significant when the stock is a threshold security, because threshold securities are

generally hard to borrow and therefore command large fees in the stock loan

market (2012, pp. 3–4).

Numerous subsequent SEC and FINRA enforcement cases have outlined abuses of Reg

SHO and market making exceptions, including SEC (2009), The SEC and FINRA have since

brought numerous disciplinary actions against options market makers (OMMs) for naked short

selling and failing to deliver in connection with market making that is not bona fide, including

SEC (2009b), ISE (2011), NASDAQ (2011), and NYSE AMEX (2011), and (SEC, 2012, pp. 3–

4). Table 3 contains a partial list of SEC and FINRA enforcement actions related to Reg SHO.

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2.7 The 2008 Emergency Order

Reg SHO’s inadequacies became apparent to the SEC at the onset of the 2008 Global

Financial Crisis. In June 2008, the SEC used its emergency authority to impose a temporary preborrow requirement for short sales. The SEC claimed to be motivated out of concern that naked

short selling would exacerbate a burgeoning financial crisis. SEC Chairman Christopher Cox

said, “Today's Commission action aims to stop unlawful manipulation through 'naked' short

selling that threatens the stability of financial institutions.” (SEC 2008X).

Notably, the SEC order applied only to 19 financial stocks. These stocks were the 17

primary dealers, which are firms that make markets in U.S. Treasury Securities, and Fannie Mae

and Freddie Mac. The order was effective from July 21, 2008, to August 12, 2008. The SEC

wrote in its emergency order:

“In these unusual and extraordinary circumstances, we have concluded that

requiring all persons to borrow or arrange to borrow the securities identified in

Appendix A prior to effecting an order for a short sale of those securities is in the

public interest and for the protection of investors to maintain fair and orderly

securities markets, and to prevent substantial disruption in the securities markets.

This emergency requirement will eliminate any possibility that naked short selling

may contribute to the disruption of markets in these securities.” (SEC 2008a)

Later in 2008, the SEC also temporarily banned short selling in all financial stocks and finally

amended Regulation SHO to eliminate loopholes and impose close-out rules.

In 2009, the SEC Office of Economic Analysis produced an “Analysis of the July

Emergency Order Requiring a Pre-Borrow on Short Sales.” The OEA Report found “Large and

significant decreases in fails to deliver,” “little change in short interest,” and “no significant

changes in bid-ask spread or market depth.” On the other hand, the OEA report found evidence

that stock lending rates were higher than before the order. “Our results suggest that imposing a

pre-borrow requirement may have had the intended effect of reducing fails” (OEA, 2009).

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2.8 The 2008 Amendments to Regulation SHO

The daily dollar value of FTDs grew until the SEC took decisive action to address

settlement failures in the third quarter of 2008. First, the SEC eliminated the options market

maker exception to Regulation SHO, discussed above. Next, the SEC passed Interim Final

Temporary Rule 204T to address “abusive ‘naked’ short selling in all equity securities” (SEC,

2008a). Final Rule 204 was enacted on July 31, 2009 (SEC, 2009a). Concurrent with 204 and

other regulatory actions, Threshold Lists and the number of FTDs shrank significantly

(Stratmann and Welborn, 2013). SEC Rule 204T addressed concerns regarding large and

persistent settlement failures in all stocks including common stocks and ETFs. 1

[Short] sellers sometimes intentionally fail to deliver securities as part of a

scheme to manipulate the price of a security, or possibly to avoid borrowing costs

associated with short sales, especially when the costs of borrowing stock are

high…large and persistent fails to deliver may deprive shareholders of the

benefits of ownership, such as voting and lending…Moreover, sellers that fail to

deliver securities on settlement date may attempt to use this additional freedom to

engage in trading activities to improperly depress the price of a security (SEC,

2009a, pp. 5–7).

Rule 204 modified Regulation SHO in several ways. First, the Regulation SHO close-out

requirements were expanded to include all equity securities, whereas prior close-out rules

applied only to stocks with “large and persistent level of fails to deliver, i.e., threshold securities”

(SEC, 2009a, p. 24). Second, 204 modified the statutory close-out period for both long and short

sales to the start of trading hours on the day after settlement date (T+4). The rule requires market

participants with FTDs at the clearing corporation to “close out the fail to deliver position by

borrowing or purchasing securities of like kind and quantity” (SEC, 2009a, p. 13).

1

Angel (2008), in an open letter to the SEC, urges the Commission to address the “enormous settlement failures in

the ETF market.”

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Market participants who continue to fail after T+4 are subject to a pre-borrow

requirement for short sales and possible disciplinary action. For all market participants, the rule

imposed “a requirement to borrow or arrange to borrow securities prior to accepting or effecting

further short sales in that security” (SEC, 2009a, p. 30).

A statutory pre-borrow requirement for failing to deliver existed prior to Rule 204. Rule

203(b)(3)(iv) of Regulation SHO imposes a similar penalty on market participants with

outstanding FTDs in Threshold securities older than thirteen consecutive settlement days. Rule

204, however, expands the penalty to include all equity securities, including ETFs, and shortens

the close-out period to T+4 days. Rule 204 also permits the SROs or the SEC to impose

monetary penalties for failing to close out aged fail-to-deliver positions (FINRA, 2012).

Nevertheless, Final Rule 204 contains a key close-out exception for market makers.

Specifically, the Final Rule states that FTDs that result from “certain” bona fide market making

must be closed out by the “third settlement day after settlement date” (SEC, 2009a, p. 14). The

purpose of this exception is to ensure market liquidity by allowing market makers “to facilitate

customer orders in a fast-moving market” (SEC, 2009a, p. 37).

The temporary market making close-out exception to Rule 204 may explain the rise in

ETF FTDs. In addition, Rule 204(a)(3) “permits a borrow as well as a purchase to close out a fail

to deliver position” (SEC, 2009a, p. 39). This provision is important because a significant and

growing segment of ETF trading concerns so-called “borrow-to-create” and “create-to-lend”

transactions. The former characterizes transactions where market makers or APs borrow and

bundle shares of ETF component stocks to obtain one creation unit (Welter, 2010). The latter

concerns transactions where ETF market makers create ETF shares for securities lending

purposes (Shastry, 2011). I discuss concerns about ETF FTDs in the next section.

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2.8 ETF Settlement Failures

While common stock FTDs fell sharply after 2008, ETF FTDs rose. According to the

SEC OEA, ETFs are now a “significant portion” of the SEC Regulation SHO Threshold List,

(OEA, 2011). According to data from 2011, “ETF fails account for approximately 60 percent of

the nearly $2 billion of daily equity trading fails reported to the SEC, and on some days they

account for 90 percent of all exchange traded fails” (Bradley et al., 2011, p. 6).

ETF settlement failures were a concern when Regulation SHO was drafted in 2004. At

the time, regulators “observed high levels of fails in some ETFs” (SEC, 2004). SRO

representatives from the NASDAQ and AMEX argued, however, that ETF FTDs were not

problematic “[b]ecause ETF shares can be continuously created and redeemed in-kind, open

clearing positions can be closed-out through the creation of ETFs and the delivery of securities to

the clearing corporation” (NASDAQ, 2004). Similarly, the AMEX commented that ETF market

makers should be exempt from locate and close-out requirement to guarantee sufficient market

liquidity (AMEX, 2004).

The SEC rejected both arguments and declined to exempt ETFs from the Regulation

SHO locate requirements (SEC, 2004). Nevertheless, neither Regulation SHO nor Rule 204T has

reduced ETF FTDs. In 2012, it was reported that the SEC was conducting an ongoing

investigation into “failed trades and ETFs.” The regulatory focus on naked short selling and

FTDs in ETFs has prompted responses from industry experts. Nadig (2011) argues that ETFs

dominate the Regulation SHO Threshold List because of a “timing mismatch.” That is, market

makers have an extra three days past settlement date to close-out FTDs, and they take advantage

of this “extra time” (Nadig, 2011, p. 9). This suggests that ETF FTDs are potentially an

opportunistic yet benign response to close-out exceptions.

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Similarly, Morningstar, an ETF index licensor, suggests that “The ETF

creation/redemption mechanism, along with the very high velocity of many ETFs' share bases,

explains why settlement failures are more frequent in ETF shares than in common equities”

(Johnson, 2011). Morningstar also argues that the process of creating new ETF shares to satisfy a

settlement obligation may take as long as trade date plus 4 or 5 days. They suggest that ETF

FTDs are ultimately resolved, but not in time to accommodate the T+3 settlement cycle. This

explanation, however, does not address why ETF FTD levels may be high and persistent.

Amery (2011) contends that ETF market makers have incentives to delay settlement.

First, it may be cheaper to borrow or create ETF shares via an AP rather than buy them on the

open market to cover a short sale. Second, time differences between ETF rebate rates and

financing rates may create arbitrage opportunities for market makers who delay settlement. A

2011 report for the Kauffman Foundation argues that ETF FTDs create systemic risk by creating

“a cumulative and potentially compounding liquidity risk” (Bradley et al., 2011).

Every fail introduces a cumulative and potentially compounding liquidity risk into

the orderly process of settling the $7.5 trillion of security transactions completed

each day, which could be especially dangerous during times when financial

institutions are short of liquidity (Bradley et al., 2011, p. 2).

A report by Goldman Sachs speaks to the mechanism by which this liquidity contraction

could occur. Boroujerdi et al. (2012) explain that ETFs may trade more than shares outstanding

because short sellers borrow and re-lend shares through “chained lending.” While the Goldman

Report argues that chained lending does not create systemic risk because ETF shares can be

bought, borrowed, or created at any time to unwind short position, “the overall liquidity and

availability of an ETF in the lending process will be directly impacted by that of the underlying

securities” (Boroujerdi, 2012, p. 14).

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Similarly, the Goldman Report argues that ETF FTDs are predominantly a result of heavy

trading volumes coupled with AP share creation and redemption delays that last longer than the

settlement cycle. Nevertheless, the authors recognize “the potential for economic loss … if one

[is] not able to lend out shares given settlement postponements” (Boroujerdi, 2012, p. 15). This

suggests that ETF FTDs may create stock borrow constraints that exacerbate market movements.

Bogan et al. (2012) provide evidence that ETF short selling more than shares outstanding

creates systemic risk. “As short interest builds in the ETF shares themselves, the underlying

index equities held by the ETF operator become a fraction of the implied ownership of the ETF

in the market—the rest is promised back by borrowers (short sellers through their prime

brokers). [Thus] the market value of the total ownership of the ETF far outstrips the underlying

assets held in index stocks by the ETF operator” (Bogan et al., 2012, p. 79). The author argues

that ETF values relative to component assets could be driven to zero during a liquidity crisis such

as May 6, 2010 “Flash Crash.” Further, Bogan et al. (2012) hypothesize that unusually high ETF

short interest and settlement failures are signs of potential market instability.

There is also evidence that ETF trading played a key role in the May 2010 Flash Crash.

Seventy percent of the equity trades broken by the SROs for price drops more than 60% were in

ETFs (CFTC and SEC, 2010a, p. 5). The final report by regulators notes the “disproportionate

impact the market disruption of May 6 had on ETFs” (CFTC and SEC, 2010b, p. 6). Additional

research on ETFs and liquidity crises are in Borkovec et al. (2010), Madhavan (2012), and Cespa

and Foucault (2012). Ben-David et al. (2018) find that “find that stocks with higher ETF

ownership display significantly higher volatility.” Evans et. al. (2024) present evidence that ETF

FTDs reflect “operational shorting” by market makers driven by the need to provide liquidity.

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2.9 Recent Academic Literature on FTDs

The literature on naked short selling has grown since the advent of the Regulation SHO

Threshold List in 2005 as well as the public release of FTD data in 2007. Angel and McCabe

(2009, p. 246) argue that “so-called ‘naked’ short selling involves an abuse of the flexibility in

the system for the settlement of stock trades.” Putniņš (2010, p. 13) concludes that “US clearing

and settlement system does not provide any significant disincentives for naked short selling.”

Stokes (2009) explores legal and regulatory remedies for firms that claim to be victims of naked

short selling and settlement failures. Using pre-Regulation SHO data, Evans et al. (2009)

demonstrate that market makers choose to fail when stock borrow costs are high.

Edwards and Hanley (2010) study short selling and FTDs during initial public offerings

(IPOs). The authors find no evidence that naked short selling causes FTDs or that short sellers

earn abnormal returns during IPOs. Stratmann and Welborn (2013) provide evidence that market

makers took advantage of an options market making exception to the short sale locate and closeout provisions of SEC Regulation SHO. This led to higher FTDs in optionable stocks relative to

non-optionable stocks.

A related literature looks at the relationship between the stock lending market and prices.

Asquith et al. (2005) find that stocks that are short sale-constrained tend to exhibit abnormal

negative returns. Avellaneda and Lipkin (2009) develop a theoretical model to demonstrate how

stock borrow constraints, such as low equity float or high borrow costs, lead to overpricing and

volatility. Branson (2010) argues that high short sale demand, coupled with weak securities

lending regulation, has led to an opaque stock lending market that does not adequately restrict

manipulative naked short selling. Dive et al. (2011) explore the growing importance of securities

lending as a revenue source for major banks.

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Boulton and Braga-Alves (2012) argue that naked short selling does not cause abnormal

negative returns because stocks that appear on the Regulation SHO Threshold List tend to be

overpriced. Lecce et al. (2012), however, reach the opposite conclusion using data from the

Australian Stock Exchange (ASX). The latter authors take advantage of a unique feature the

ASX whereby certain stocks may be sold short without borrowing on certain dates. They find

that naked short selling leads to higher abnormal negative returns, higher volatility, and lower

liquidity in stocks with higher borrowing costs.

Stratmann and Welborn (2013) use a difference-in-differences analysis to examine the

effects of eliminating the options market maker exception to Regulation SHO. The authors find

that “eliminating the Exception led to fewer fails-to-deliver and higher stock borrow rates for

optionable stocks as compared to non-optionable stocks. Further, removing the Exception

reduced fails-to-deliver for optionable stocks when the price of borrowing stock was high.”

Fotak et. al. (2014) examine settlement failures in NYSE stocks for the period from 2005

to 2008. They find that “greater FTDs lead to higher liquidity and pricing efficiency.” Fotak et.

al. (2014) also “do not find any evidence that FTDs caused price distortions or the failure of

financial firms during the 2008 financial crisis.”

Stratmann and Welborn (2016) examine how high FTDs affect abnormal returns. The

authors demonstrate that “stocks with fails-to-deliver (FTDs) experience negative abnormal

returns that are proportional to their FTD levels.” Stratmann and Welborn (2016) also find that

“short sellers of low and high FTD stocks obtain positive estimated profits” and “FTDs reflect

nonbinding short sale constraints which do not restrict informed short selling.” The authors show

that FTDs are highly correlated with short selling, but are able to conclude whether high FTDs

cause abnormal returns

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3. Data

We have only two metrics by which to evaluate the efficacy of Reg SHO. These are (1)

daily Reg SHO Threshold Lists, and (2) daily data on fails-to-deliver (FTDs) from the SEC

Freedom of Information Act (FOIA) Office. In this section, I consider how these two panel data

series have evolved from when Reg SHO was enacted in 2005.

The goal of this investigation is to generate meaningful aggregate statistics on Reg SHO

Threshold firms. To conduct an analysis of securities over 20 years, I use two databases from

Wharton Research Data Services (WRDS). The first dataset, from the Center for Research on

Security Prices (CRSP), is best for historical tickers that may no longer be active. The second

dataset, Compustat, is best for current active tickers and recent data. While there is overlap

between the two datasets, this is also real divergence in their coverage of the 15k+ SHO tickers.

15,190 unique tickers have appeared on Reg SHO Threshold Lists since January 3, 2005. Of

those, 14,771 have unique CUSIPs, as some companies have multiple tickers on the Threshold

List. Are related challenge is that some tickers are recycled among different companies, and

many tickers are dead or dormant. The biggest methodological challenge is that Reg SHO did not

require the major listing exchanges to include CUSIP data in their daily threshold lists.

Of the 15,190 unique Threshold tickers, 4,658 are not covered in any WRDS database,

such as CRSP or Compustat. This incomplete coverage frustrates analysis and reflects a policy

error created by omitting CUSIPs in Reg SHO reporting. Moreover, only 5,301 Threshold SHO

tickers appear in both the CRSP and Compustat databases. Within the CRSP data, we have

coverage on 2,105 Threshold tickers that are not in Compustat. Within the Compustat data, we

have coverage on 3,773 tickers that are not in CRSP. A “match” is created when we match a

ticker and a date to a specific Reg SHO Threshold List for a given day.

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3.1 Regulation SHO Data

Figure 1 presents the historical daily Reg SHO totals, broken down by listing exchange.

The exchanges which currently publish daily Reg SHO Threshold List data are the New York

Stock Exchange (NYSE), the Nasdaq Stock Market, FINRA OTC, and BATS Exchange (CBOEBZX). Due to consolidation in exchange ownership, the Chicago Stock Exchange (CHX) data is

now part of the NYSE Reg SHO Threshold data.

For the period from January 2005, when Reg SHO was enacted, through Q4 2008, when

the options market maker exception to Reg SHO was eliminated, mean daily Threshold List

totals were 282 stocks, with a standard deviation of 83 stocks. The highest total number of Reg

SHO stocks was 514 on April 1, 2008. During this time, Nasdaq stocks averaged 80% of total

Threshold Securities.

For the period from 2009 through 2019, average daily total threshold stocks dropped to

95, with a standard deviation of 26. NYSE stocks were half of daily totals on average, and

Nasdaq stocks were 1/3. In October 2014, securities who failed to meet new Nasdaq listing

requirements shifted to the FINRA “Over the counter” (OTC) market. Thereafter, an average of

15% of daily threshold securities were from FINRA OTC listings.

For the period from 2020 through 2024, average daily threshold securities were 75, with a

max of 215 and standard deviation of 25. NYSE securities were 30% of the daily average and

Nasdaq were 33%. In Q2 2023, Nasdaq securities again began to dominate threshold totals. As of

the end of 2024, Nasdaq securities were roughly 60% of daily threshold totals. Securities listed

on BATS Global Markets, which is owned by the Chicago Board Options Exchange (CBOE),

averaged 10% of threshold stocks during this recent period. There was also a new local high of

96 total threshold securities on 26 December 2024.

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Figure 2 breaks down the daily threshold list totals by security type. For the period from

2005 through 2008, common stocks averaged 145, or 50% of daily threshold totals, with a high

of 7% and a standard deviation of 8%. Unknown category securities are averaged 102, or 37% of

daily totals from this period. As discussed above, these stock tickers are reported in daily files

with names but without CUSIPs. As a result, we are unable to recover classifying data for these

Threshold securities from either the CRSP or Compustat databases.

For the period from 2009 through 2019, ETFs were over half of daily threshold securities,

with a daily average of 50 ETFs. In contrast, known common stocks fell to 22% of average daily

totals, or 20 securities. ADRs and Unknown securities tied for the 3rd largest category with 12%

each of daily threshold totals.

For the period from 2020 to 2024, ETFs declined from 51% to 40% of average daily

totals. At the same time, common stocks rose to 31% of the daily average, ADRs rose to 15%,

and Unknown securities fell to 10%. Other security types, including mutual funds, preferred

shares, structured products, common stock plus warrant units, and warrants alone were at or

under 1%. Notably, ETFs and total threshold securities peaked at 135 and 215, respectively, on

March 27, 2020, at the height of market concerns regarding the Covid-19 Pandemic.

Tables 4 through 7 present lists of securities with the longest tenure on Reg SHO

Threshold Lists. Tables 4 present threshold summary data for the all-time top common stocks

such as Overstock.com (OSTK; 921 total days), Krispy Kreme Doughnuts (KKD; 645 total

days), Netflix.com (NFLX; 641 total days), and Chipotle Mexican Grill (CMG; 544 total days).

Table 5 lists common stocks with a 2024 threshold date, such as Sunpower Corp (SPWR; 547

days), Beyond Meat Inc (BYND; 382 days); Nikola Corp. (NKLA; 138 days), and Bakkt

Holdings (BKKT; 123 days).

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Tables 6 and 7 list ETFs with the largest Reg SHO Threshold Totals. The ETF with the

longest total days on the list is XRT, the S&P 100 Retail ETF, with 1,691 total threshold days.

XRT was on the threshold list as recently as 27 December 2024. FTDs in XRT have been as high

as $418 million dollars. XRT is notable for frequently having short interest greater than shares

outstanding, which is a mystery that we explore in greater depth below.

Many of the ETFs with long Reg SHO Threshold listings are leveraged, such as the

Direxion Daily Gold Miners Bear 2x Shares, (DUST; 1627 days), the Direxion Daily 30-Year

Treasury Bull 3X (TMF; 1583 days), Direxion Energy Bear 3X Shares (ERY; 1464 days), and

the ProShares Ultra VIX Short-Term Futures ETF (UVXY; 1297 days). Of those ETFs that were

on the threshold list in 2024, the regional banking ETF KRE saw FTDs peak at $274 million.

Figure 3 shows the breakdown of Reg SHO Threshold securities by type. Common stocks

are the largest group with 39.70% of the total. ETFs are in second place with 20%. Unknown

securities, which are mostly from the 2005-2008 period, are 8.5%. ADRs are 8.5%.

Figure 4 breaks down the total Threshold days for the period from 2005 to 2024 by

security type. Surprisingly, unknown securities account for almost 65%, or 2/3, of all Reg SHO

Threshold days. This may reflect the fact that many of these tickers are temporary and related to

corporate actions. Nevertheless, it is striking that almost 2/3 of the Threshold database contains

ticker symbols and names that are not stored in CRSP or Compustat. Common stocks are the

next largest category at under 20%. One reason this may be “low” is that a relatively small set of

tickers end up on the Threshold List. ETFs are in third place with 10.4% of total threshold days.

Figure 5 is a histogram that shows the distribution of total Reg SHO Threshold days.

Unsurprisingly, this is a long-tailed distribution with a median of 4 days, a mode of 1 day, and a

max of 1,546 days. This reflects the fact that most stocks drop off the list after 1 day.

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3.2 Fail-to-deliver Data

Figures 6 and 7 show the daily total dollar value of FTD for the period from 2007

through 2024. These data are from the SEC Freedom of Information Act (FOIA) office and are

reported on a bi-monthly basis, with a two-week lag. I generated these totals using the daily price

and fail quantity data provided by the SEC, per ticker (and/or cusip) per day. I did not use any

WRDS data, such as CRSP or Compustat to determine these totals, which is why the data set

begins in April 2007, which is when the SEC started to report price data with daily FTDs.

Figure 6 presents the daily dollar value of FTDs for the full period. The average for this

period is $2.9 billion USD. The figure shows clearly the “drop” in daily FTDs after the October

2008 amendments to Reg SHO. The highest FTD level was $20.3 billion on 23 September 2008.

Notably, the second highest FTD level was $19.8 billion on 23 September 2024. Median FTDs

were $2.26 billion for this period.

Figure 7 truncates the data from Figure 6 to just consider the last five years of data, from

2019 to 2024. Interestingly, the average daily FTDs for this period were $2.8billion, which is just

under the full sample average of $2.9 billion. Moreover, median FTDs were higher at $2.44

billion. One noteworthy “trend” in the data are spikes that tend to coincide with quarterly options

expiration dates. For example, in 2021, FTDs appear to peak on 23 March, 21 June, and 21

September, which are each 1-2 settlement days after options expiration dates. This suggests that

there may be a connection between settlement failures and options trading, at least temporarily.

Figures 8 and 9 show daily FTDs (USD) by security type for Threshold stocks only. For

the period from 2005 through 2008, common stocks averaged 80% of daily FTDs. From 2009 to

2019, however, ETFs were 75% of average of daily FTDs. For the final period, from 2009

through 2019, common stocks and ETFs were 41% and 44.5% of FTDs, respectively.

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Table 8 lists the securities according to their maximum value of FTDs, in descending

order. It is notable that 5 of the top 10 securities on this list are major Index ETFs. The largest

maximum FTDs were in IWM, the Russell 2000 Index ETF, with $10.99 billion on 27 June

2007. The next highest FTDs were in SPY, the S&P 500 ETF, with $7.5 billion on 16 March

2023. Next are Microsoft and Nvidia, which each had an FTD peak on 23 September 2024 of

over $3 billion dollars each. This is a remarkable coincidence and merits further investigation.

Table 9 is a sample list of securities that have experienced a short interest of 90% or more

at some point during the period from 2004 through 2024. The daily short interest data are highly

proprietary data from FIS Securities. I paired these data with the Compustat daily data, which

reflect daily changes in shares outstanding. As we have already established, the Compustat data

do not provide good coverage of inactive or dead tickers, or at least not as good as CRSP. But the

CRSP data do not update shares outstanding daily, so they are of limited use for daily insights.

Again, XRT is at the top of the list with 699 days over 90% shares short. Curiously, the

maximum loan percentage is 699%, which indicates that there are days where short interest is

almost 7x shares outstanding. Again, this is a shocking statistic, and merits further investigation.

Also on this list are Ameriprise Financial (AMP), Barclay’s S&P 500 ETF (VXX), Peleton

Interactive Inc (PTON), and Pre-Paid Legal Services (PPD).

We look more carefully at XRT in Figures 10 and 11. Figure 10 shows FTDs versus the

loan percentages for XRT for the period from 2007 to present. Figure swaps FTDs for price.

Figure 10 shows a strong correlation between FTDs and loan percentage, which is consistent

with the logic that short selling and settlement failures are related. Figure 10 indicates that some

spikes in XRT FTDs correspond to price drops, such as in September 2020 and in September

2022.

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4. Policy Proposals

The data in the previous section indicates that Reg SHO has been ineffective at reducing

the size and persistence of trade settlement failures. I therefore consider three proposals for

reforming Reg SHO to reduce large and persistent fail-to-deliver (FTD) positions. First, I discuss

monetary penalties for failing to deliver securities. Second, I consider the logistics and

implications of a mandatory pre-borrow requirement for all short sales. Finally, I explore options

for reasonable restrictions on market maker exceptions to timely settlement rules.

4.1 Monetary Penalties for failing to deliver

In the original 2003 draft of Regulation SHO, the SEC proposed imposing monetary

Penalties for failing to deliver. SEC (2003) contains the following language, (emphasis added):

“In addition, the rule would require the rules of the registered clearing agency that

processed the transaction to include the following provisions: (A) A broker or

dealer failing to deliver such securities shall be referred to the NASD and the

designated examining authority for such broker-dealer for appropriate

action;55 and (B) The registered clearing agency shall withhold a benefit of any

mark-to-market amounts or payments that otherwise would be made to the party

failing to deliver,56 and take other appropriate action, including assessing

appropriate charges against the party failing to deliver. Both of these

requirements should assist the Commission in preventing abuses and promote the

prompt and accurate clearance and settlement of securities transactions.

In total, the SEC received 462 comment letters on proposed Regulation SHO, including from 1

academic, 10 associations and organizations, 10 attorneys and law firms, 13 Broker-Dealers, 7

companies, 1 national securities clearing agency, 14 national securities exchange & markets, and

over 400 individuals. Due to the overwhelming response to proposed Regulation SHO, in July

2004, after the commend period had closed, the SEC released a summary of the comments

received.

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Most commenters opposed naked short selling and settlement failures of any kind.

Moreover, “About half of the commenters focusing on the delivery portion of Rule 203 requested

the Commission impose harsher penalties for failures to deliver” (SEC, 2004). Nevertheless,

industry leaders opposed monetary penalties for failing to deliver. A group letter from officials

Citigroup, Goldman Sachs, Merrill Lynch and Morgan Stanley recommended “that the

Commission proceed with imposing a mandatory buy-in for failures, while eliminating the 90day suspension and penalties associated with securities with a significant number of delivery

failure” (SEC, 2004a).

Ultimately, the SEC followed the advice of industry officials and ignored the support of

retail investors. The final rule of Reg SHO made no mention of “charges” or “penalties” for

failing to deliver. In so doing, the SEC may have followed the guidance of the Securities Industry

Assocation (SIA, now known as SIFMA), which argued that, “[b]ecause of NSCC’s continuous

net settlement system nets all buys and sells within a particular firm, the broker-dealer cannot

determine which customer’s transaction gave rise to the fail” (SEC, 2004a).

Nevertheless, subsequent major enforcement actions the American Stock Exchange,

FINRA, and the SEC have demonstrated that this claim was false. In numerous cases, including

Amex (2007), SEC (2009), SEC (2011), SEC (2012), and others, securities regulators had no

difficulty connecting specific trade settlement failures with specific unlawful actors,

notwithstanding the challenges presented by the net settlement system.

While the SEC was debating whether to impose penalties for failing to deliver equity

securities, the U.S. Treasury was engaging the same debate and analysis over U.S. Treasury fails.

In 2005, the NY Federal Reserve Bank published a report entitled “Explaining Settlement Fails.”

This report examined the size, causes, and consequences of UST fails for the 1990-2004 period.

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The authors of this study document a growing but volatile record of settlement failures in

UST. “The evidence suggests that most episodes of elevated settlement fails are related to market

participants’ incentive to avoid failing. Fails have tended to be high in the weeks before and

during the Treasury Department’s quarterly refundings and in the weeks that include the end of a

calendar quarter, when security borrowing costs tend to be high” (NY Fed, 2005).

The problem of UST settlement fails became acute in 2008, in connection with the failure

of Lehman Brothers and other market disruptions. One analysis noted that “the Treasury market

experienced an extraordinary volume of fails that threatened to erode the perception of the

market as being free of credit risk” (NY Fed, 2010). In response, the Treasury Market Practices

Group (TPMG) met to discuss solutions to the US fails problem. In 2009, TMPG introduced a

“dynamic fails charge” to incentivize timely settlement of Treasury securities and reduce fails.

“The fails charge thus preserves a significant economic incentive for timely settlement even

when interest rates are close to zero” (NY Fed, 2010).

The TMPG fails charge policy was later updated in 2016 and 2018 and reflects grave

concerns about fails-to-deliver in connection with orderly markets. A 2020 TMPG FAQ notes:

“Persistent elevated fail levels create market inefficiencies, increase credit risk for

market participants and heighten overall systemic risk. In higher rate

environments, the time value of money that is lost when delivery is not made as

contracted provides an incentive to sellers to deliver bonds as agreed. Given that

this incentive is smaller in low short-term rate environments, sellers are less

sensitive to the timeliness of delivery. The TMPG recommends a financial charge

to provide an incentive to sellers to deliver securities in a timely fashion or cure

fails that do occur thereby minimizing overall fail levels.” (NY Fed, 2020)

Nevertheless, UST fails are still not zero, and TMPG may need to update their fails considering

new from 2024 which indicate that US fails have risen to a new record high (FA Mag, 2024). The

UST experience underscores the need for monetary penalties for failing to deliver stocks.

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4.2 Universal pre borrow requirement

As discussed above, the July 15, 2008 SEC Emergency Order required traders to borrow

securities prior to effecting short sales in the stocks of the 17 primary dealers and the 2

Government-sponsored enterprises (GSE), Fannie Mae and Freddie Mac. The SEC said,

“False rumors can lead to a loss of confidence in our markets. Such loss of

confidence can lead to panic selling, which may be further exacerbated by

“naked” short selling. As a result, the prices of securities may artificially and

unnecessarily decline well below the price level that would have resulted from the

normal price discovery process. If significant financial institutions are involved,

this chain of events can threaten disruption of our markets” (SEC 2008a)

The SEC Order referred to market volatility related to the sale of The Bear Stearns Companies

Inc in March 2008 as inspiration for the order. Notably, in response to industry pressure, the SEC

later exempted market makers from the pre-borrow requirement.

The borrow and arrangement-to-borrow requirement of the Order does not apply

to certain bona fide market makers. (The settlement date delivery requirement of

the Order applies to these market makers.) The purpose of this accommodation is

to permit market makers to facilitate customer orders in a fast-moving market

without possible delays associated with complying with the borrow and

arrangement-to-borrow requirement of the Order. (SEC 2008a2)

Nevertheless, the OEA (2009) report documents a clear reduction in naked short selling

and FTDs in the affected securities. Below are the key findings of the OEA (2009) report:

•

•

•

•

•

•

•

•

Large and statistically significant decreases in short selling volume

Dramatic, but temporary, initial increases in stock lending rates followed by rates still

higher than before the Order

Large and significant decreases in fails to deliver

Little change in short interest

No significant changes in bid-ask spread or market depth

No significant migration of trading volume to London for cross-listed securities

No significant changes in option trading volume or open interest

No significant changes in volume

The implication is that a short sale pre-borrow requirement would not impact market quality.

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4.3 Elimination of all market making exceptions

While the options market maker exception was eliminated in 2008, Reg SHO still offers

certain locate and delivery flexibility for registered market makers. Specifically, market makers

engaged in short selling can rely on the "locate" requirement differently when they are executing

transactions as part of normal market-making activities, such as hedging or filling customer

orders. Market makers are also allowed to sell short without a locate when the short sale is made

to hedge their inventory positions and is part of bona fide market-making activity. This

justification for this is that market makers can manage risk and provide market liquidity.

For market makers, Rule 204 amended Reg SHO in the following ways. First,

Rule 204 instituted mandatory close-out requirements for situations where there are persistent

fails to deliver. If a security has a fail to deliver for a certain period (usually no more than 13

consecutive settlement days), then the market maker (or any entity failing to deliver) must close

out that position. This was a shift from Rule 203, where there were no such explicit closure

requirements for ongoing fails.

Second, Rule 204 established a time frame for when close-out actions need to

occur. This timeline required market makers and others to be more diligent in managing their

short positions and ensuring they can deliver securities in a timely fashion. Previously, there

were no definitive timelines set for resolving FTDs.

Third, while the locate requirement continued to exist in some form, Rule 204

clarified and expanded the expectations placed upon market makers regarding the need to have a

reasonable belief that securities can be borrowed when executing short sales. For market makers,

this required adopting more systematic procedures to ensure compliance and trades could not be

executed on an "as-available" basis without proper locates.

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Fourth, Rule 204 brought explicit attention to threshold securities. If a security is

designated as a threshold security, then additional obligations apply to market makers, including

close-out requirements after certain fails. Arguably, this provision was novel in creating a

heightened level of scrutiny on specific stocks.

Finally, while Rule 204 required compliance from all market participants, it nevertheless

recognized the unique role of market makers, allowing some exceptions for bona fide marketmaking activities. This recognition meant that while they had to comply with regulations, they

also retained some operational flexibility to perform their essential function in the marketplace

without facing undue restrictions.

Whatever the justification for continued market making exceptions to Reg SHO,

the data presented above show that the current rule regime is inadequate to prevent large and

persistent FTDs. Furthermore, after Rule 204 was added to Reg SHO in 2009, the overall trend

in FTDs has been upward and with higher highs. As previously observed, the second highest

total FTD day was on 23 September 2024 with $19.8 billion.

Perhaps not coincidentally, the largest Reg SHO fines and most noteworthy SEC

enforcement actions have involved securities firms engaged in executing and clearing short sales.

Indeed, market makers and industry professionals who commented on the original 2003 Reg

SHO proposal were among the most vocal proponents of the market making exceptions to locate

and close-out provisions. Many of those Reg SHO commenters were later sanctioned by the SEC

for engaging in fraudulent or violative activities, including Bernard and Peter Madoff (2003),

Scott Arenstein (2003), UBS Securities (2003), Goldman Sachs & Co. (2004), Morgan Stanley &

Co (2004), and Citigroup Global Markets (2004).

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5. Conclusion

This analysis shows how Reg SHO, despite years of consideration and amendments, has

provided an ineffective framework for governing short selling and trade settlement. Data from

the NSCC CNS system show that daily FTDs average are consistently $3b dollars. Moreover, as

established in the academic literature, FTDs are highly correlated with shorts selling and are not

the result of random clerical errors. Regulation SHO Threshold List data from the self-regulatory

organizations (SROs) show that the number of stocks with large and persistent FTDs has not

decreased. FTDs are concentrated in ETFs like XRT, for reasons poorly understood.

I propose a series of remedies to reduce FTDs and improve market integrity. The first

proposal involves universal penalties and/or charges for firms that fail to deliver securities for

any reason. I base this recommendation on best practices in the market for U.S. Treasury

securities, where fails charges have been in place since 2008. The SEC knew that penalties for

failing to deliver securities were the appropriate remedy when Reg SHO was proposed in 2003,

and the SEC has an opportunity now to implement the original proposal.

Second, I propose a universal pre borrow requirement for all shorts by all market

participants. This recommendation is based on the SEC’s own 2008 emergency order in the

securities of the primary dealers, which the SEC Office of Economic Analysis found reduced

naked short selling and FTDs without reducing market quality or trading volumes. The related

finding, that a pre-borrow requirement raised borrow costs, is a logical finding when compared

to a rules regime where short sellers benefitted from “fuzzy” borrowing requirements.

Third, I propose to eliminate all market making exceptions to short sale rules. While

perhaps well intended, market making exceptions appear to be the reason why dozens of stocks

remain on the threshold list for weeks and months. At age twenty, the SEC has an important

opportunity to fix Reg SHO and eliminate large and persistent FTDs once and for all.

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List of Tables and Figures

#

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

Item

Table 1

Table 2a

Table 2b

Table 2c

Table 2d

Table 3

Figure 1

Figure 2

Table 4

Table 5

Table 6

Table 7

Fugure 3

Figure 4

Figure 5

Figure 6

Figure 7

Figure 8

Figure 9

Table 8

Table 9

Figure 10

Figure 11

Figure 12

Figure 13

Description

Timeline of Key Short Selling and Regulation SHO Events

Regulation SHO, Rule 200

Regulation SHO, Rule 201

Regulation SHO, Rule 203

Regulation SHO, Rule 204

List of Key Reg SHO Enforcement Actions

Reg SHO Threshold List - Daily Totals by Listing Exchange

Reg SHO Threshold List - Daily Totals by Security Type, 2005-2024

Reg SHO Threshold List - Top Common Stocks, 2005-2024

Reg SHO Threshold List - Top Common Stocks (with 2024 date)

Reg SHO Threshold List - Top ETFs, 2005-2024

Reg SHO Threshold List - Top ETFs (with 2024 Date)

Reg SHO Threshold List - Total SHO Days by Security Type, 2005-2024

Reg SHO Threshold List - Total SHO Securities by Type, 2005-2024

Histogram - Number of Days on SHO Threshold List

Daily Total FTDs ($ USD), 2007-2024

Daily Total FTDs ($ USD), 2019-2024

Daily Total FTDs ($ USD) by Security Type, SHO Stocks only, 2007-2024

Daily Total FTDs ($ USD) by Security Type, SHO Stocks only, 2019-2024

Stocks with Highest FTDs, 2007-2024

Sample of Securities with > 90% Short Interest

XRT, FTDs vs SI/Shares Out, 2007-2024

XRT, Price vs SI/Shares Out, 2007-2024

GME, FTDs vs SI/Shares Out, 2007-2024

GME, Price vs SI/Shares Out, 2007-2024

49

WORKING PAPER

Table 1

Timeline of Key Short Selling and Regulation SHO Events

#

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Month

February

June

Year Event

Code / Title

Link

1963 NYSE shuts down trading on Feb 6 to tackle backlog of trades

1967 NYSE founds Central Certificate Service (CCC)

1973 Creation of Depository Trust Company (DTC)

1975 Securities Act Amendments of 1975

1976 Creation of National Securities Clearing Corporation (NSCC)

1986 NASD "Pollack Report" on short selling

June

1992 "Short Sales"

NYSE Rule 10 / FINRA 3310

1996 "Customer Account Statements: Recommendations and Obligations..." NYSE Rule 440C

February 1997 "Short Sales and Borrowing"

NASD Rule 2650 / FINRA 4320 https://www.finra.org/rules-guidance/rulebooks/finra-rules/4320

1998 Collapse of Long Term Capital Management (LTCM)

March

1999 "Credited and Debited Securities."

NASD Rule 3370

October 2001 Enron Collapse

October 2003 Proposed Rule, Short Sales. (Replaces Rules 3b-3, 10a-1, and 10a-2)

SEC Rules 200, 202T, and 203 https://www.sec.gov/rules-regulations/2004/07/short-sales#34-48709proposed

July

2004 SEC Comments on Reg SHO

SEC Rule 242 (formally)

https://www.sec.gov/files/rules/extra/s72303comsum.pdf

September 2004 Final Rule, Short Sales

Rule 242 of SEC Act.

https://www.sec.gov/rules-regulations/2004/07/short-sales#34-48709proposed

July

2006 Proposed Rule, Amendments to Regulation SHO

Rule 203b3

March

2007 Proposed Rule, Amendments to Regulation SHO

Rule 203b3

https://www.sec.gov/rules-regulations/2007/08/amendments-regulation-sho#34-55520propose

August

2007 Elimination of the Grandfather Clause

Rule 203b3

https://www.sec.gov/rules-regulations/2007/08/amendments-regulation-sho#34-56212final

July

2008 Proposed Rule; Reopening comment on Amendments to Regulation SHORule 203

https://www.sec.gov/rules-regulations/2008/10/amendments-regulation-sho#34-58107propose

July

2008 SEC Enhances Investor Protections Against Naked Short Selling

12(k)2 of the 1934 Act

https://www.sec.gov/news/press/2008/2008-143.htm

March

2008 “Naked” Short Selling Anti-Fraud Rule

Rule 10b-21

https://www.sec.gov/rules-regulations/rulemaking-activity?search=S7-08-08

August

2008 Comments on "Naked" Short Selling Anti-Fraud Rule

Rule 10b-21

https://www.sec.gov/comments/s7-08-08/s70808.shtml

October 2008 Elimination of the Options Market Maker Exception

Rules 200 and 203

https://www.sec.gov/rules-regulations/rulemaking-activity?search=S7-19-07

October 2008 Final - "Naked" Short Selling Anti-Fraud Rule

Rule 10b-21

https://www.sec.gov/rules-regulations/rulemaking-activity?search=S7-08-08

October 2008 Interim final temporary rule; request for comments

Rule 204T

https://www.sec.gov/rules-regulations/2009/07/amendments-regulation-sho#34-58773final

July

2009 Rule 204 Finalized

Rule 204

https://www.sec.gov/rules-regulations/2009/07/amendments-regulation-sho#34-60388final

August

2009 Short Sale Price Test Restriction

Rule 10a-1

https://www.sec.gov/rules-regulations/rulemaking-activity?search=S7-08-09

November 2009 OEA, "Impact of Recent SHO Rule Changes on Fails to Deliver"

Rules 203, 204T

https://www.sec.gov/files/oeamemo110409.pdf

50

WORKING PAPER

Table 2a

Regulation SHO, Rule 200

Part 242

Name

200

Definition of

“short sale” and

marking

requirements

Description

Definition of Short Sale : A short sale is defined as any sale of a security that the seller does not own or a sale that is executed through a borrowed security.

Ownership Conditions : A person is considered to own a security if they have title to it, have made an unconditional purchase contract, hold convertible or

exchangeable securities, have exercised an option to acquire it, have rights or warrants that have been exercised, or hold a futures contract with a notification of

physical settlement.

Broker-Dealer Provisions : Brokers or dealers are deemed to own a security under certain conditions, even if not net long, particularly when acting in specific

capacities related to arbitrage or index position unwinding, provided the sale occurs outside of significant index declines.

Marking Requirements : All sell orders for equity securities must be marked as “long,” “short,” or “short exempt” based on the seller's ownership status and the

conditions under which the sale is made.

Exemptions : The Commission may grant exemptions from these provisions upon written application or on its own motion, which may apply to specific transactions,

securities, or groups of persons.

Source: Code of Federal Regulations. 2023. Definition of ‘Short Sale’ and Marking Requirements, vol. 17, sec. 242.200. U.S. Government Publishing Office, https://www.ecfr.gov/current/title-17/chapte

242

51

WORKING PAPER

Table 2b

Regulation SHO, Rule 201

Part 242

201

Name

Description

Circuit Breaker Circuit Breaker Mechanism : A trading center must establish policies to prevent the execution of short sale orders of a covered security at prices equal to or below the

current national best bid if the security has decreased by 10% or more from its previous closing price.

Enforcement and Monitoring : Trading centers are required to regularly monitor the effectiveness of their short sale policies and take immediate corrective action when

deficiencies are identified.

Short Exempt Orders : After a 10% price decline notification, brokers can mark short sale orders as "short exempt" if they are at a price above the current national best

bid. Brokers must implement procedures to prevent incorrect designation of these orders.

Conditions for Short Exempt Orders : Specific conditions allow brokers to mark short sale orders as "short exempt," including ownership of the covered security, market

maker activities, and compliance with good faith requirements for short selling, particularly in odd lots or in the context of underwriting.

VWAP Transactions and Limits : Short sales executed at the volume-weighted average price (VWAP) must adhere to specific criteria, including limits on the percentage

of a security's average daily trading volume that can be shorted, to prevent market manipulation.

Source: Code of Federal Regulations. 2023. Circuit breaker, vol. 17, sec. 242.201. U.S. Government Publishing Office, https://www.ecfr.gov/current/title-17/chapter-II/part-242.

52

WORKING PAPER

Table 2c

Regulation SHO, Rule 203

Part 242

203

Name

Description

Borrowing and Long Sales Restrictions : Brokers or dealers may not lend or arrange the loan of any security for delivery if the sale is marked "long" and the broker has reasonable

delivery

grounds to believe the security will not be delivered on the settlement date. Exceptions exist under certain conditions, including loans to other brokers and specific

requirements circumstances involving seller notification.

Short Sale Requirements : Brokers and dealers cannot accept short sale orders unless they have either borrowed the security or have a reasonable belief that it can be

borrowed, along with documentation of this compliance. There are specific exceptions for registered brokers relying on another broker who is compliant.

Fail to Deliver Provisions : Participants at a registered clearing agency must close out fail to deliver positions for threshold securities within specified time frames (e.g.,

13 consecutive settlement days) by purchasing securities equivalent in kind and quantity.

Threshold Security Definition : A threshold security is defined based on the presence of significant fail to deliver positions and must meet criteria including an aggregate

fail position that exceeds 10,000 shares or 0.5% of total shares outstanding over five consecutive settlement days.

Exemptive Authority : The SEC may grant exemptions to any provisions of this rule for specific transactions, classes of transactions, or persons, either unconditionally or

with specified conditions, ensuring it serves the public interest and protects investors.

Source: Code of Federal Regulations. 2023. Borrowing and delivery requirements, vol. 17, sec. 242.203. U.S. Government Publishing Office, https://www.ecfr.gov/current/title-17/chapter-II/part-242.

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WORKING PAPER

Table 2d

Regulation SHO, Rule 204

Part 242

Name

204

Close-out

requirement

Description

Close-Out Requirement : Participants of a registered clearing agency must deliver securities by the settlement date for both long and short sales. If there’s a fail to

deliver position, they must close it out by borrowing or purchasing equivalent securities by the next trading day.

Specific Close-Out Timelines : The rule outlines different timelines for closing out fail to deliver positions:

(1) By the next trading day for general fail to delivers,

(2) By the third trading day for positions arising from long sales, and

(3) By the thirty-fifth calendar day for sales where the seller is deemed to own the security but hasn’t delivered.

Restrictions on Short Sales : If a participant has an unresolved fail to deliver position, they and any brokers or dealers dependent on them cannot accept short sale

orders unless they first borrow the security or make arrangements to borrow it until the fail to deliver is resolved.

Notification Requirements : Participants must notify brokers or dealers of any fail to deliver positions they have not closed out, as well as inform them once they

successfully close out such positions.

Exemptions and Allocations : If a portion of a fail to deliver position is allocated to another broker or dealer, that entity must comply with the same close-out

requirements. However, if a broker or dealer purchases or borrows the securities in compliance with specific conditions, they may not be subject to some requirements

of the rule.

Source: Code of Federal Regulations. 2023. Close-out requirement, vol. 17, sec. 242.204. U.S. Government Publishing Office, https://www.ecfr.gov/current/title-17/chapter-II/part-242.

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Table 3

List of Key Reg SHO Enforcement Actions

#

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

Year

2007

2007

2009

2011

2012

2012

2013

2014

2015

2016

2018

2020

2021

2022

2022

2023

2023

2025

2025

Party

Goldman Sachs

Arenstein

HCM

UBS Securities LLC

Wolfson

OptionsXpress

CBOE

Penson Securities

Merrill Lynch

Goldman

Citigroup Global

Biltmore

Murchinson

Citigroup Global

UBS Securities LLC

Maxim

Simplex Trading

Morgan Stanley

Robinhood

Fine

$2 million

$5 million

$4 million

$ 8 million

$4.5 million

$4.8 million

$6 million

$125 thousand

$11 million

$15 million

$450 thousand

$125 thousand

$7 million

$1.5 million

$2.5 million

$800 thousand

$200 thousand

$5 million

$45 million

Link

https://www.sec.gov/news/press/2007/2007-41.htm

https://www.thekomisarscoop.com/wp-content/uploads/2021/05/Arenstein-AMEX-Decision_072007.pdf

https://www.sec.gov/news/press/2009/2009-179.htm

https://www.sec.gov/news/press/2011/2011-240.htm

https://www.sec.gov/files/litigation/admin/2012/34-67451.pdf

https://www.sec.gov/newsroom/press-releases/2012-2012-66htm, https://www.sec.gov/files/litigation/opinions/2016/33

https://www.sec.gov/newsroom/press-releases/2013-2013-107htm

https://www.sec.gov/newsroom/press-releases/2014-101, https://www.reuters.com/article/markets/sec-says-ex-penson-e

https://www.sec.gov/newsroom/press-releases/2015-105

https://www.sec.gov/newsroom/press-releases/2016-9

https://www.finra.org/sites/default/files/fda_documents/2014041142501%20Citigroup%20Global%20Markets%20Inc.%20

https://www.sec.gov/enforcement-litigation/administrative-proceedings/34-88744-s

https://www.sec.gov/newsroom/press-releases/2021-156, https://www.sec.gov/files/litigation/admin/2021/34-92684.pdf

https://www.finra.org/sites/default/files/fda_documents/2018057494001%20Citigroup%20Global%20Markets%20Inc.%20

https://www.finra.org/sites/default/files/2022-10/UBS-Securities-AWC-100422.pdf

https://www.sec.gov/enforcement-litigation/administrative-proceedings/34-98605-s

https://www.sec.gov/enforcement-litigation/administrative-proceedings/34-98346-s

https://seclaw.com/morgan-stanley-agrees-to-pay-5-million-for-reg-sho-violations-in-prime-brokerage-swaps-business/

https://www.sec.gov/newsroom/press-releases/2025-5

55

WORKING PAPER

Figure 1

Reg SHO Threshold List - Daily Totals by Listing Exchange

Reg SHO Threshold List - Daily Totals by Listing Exchange

600

500

400

300

200

100

2005-01-07

2005-05-03

2005-08-24

2005-12-15

2006-04-11

2006-08-03

2006-11-24

2007-03-21

2007-07-13

2007-11-02

2008-02-28

2008-06-20

2008-10-13

2009-02-05

2009-06-01

2009-09-22

2010-01-14

2010-05-10

2010-08-31

2010-12-22

2011-04-15

2011-08-09

2011-11-30

2012-03-26

2012-07-18

2012-11-07

2013-03-05

2013-06-26

2013-10-17

2014-02-11

2014-06-05

2014-09-26

2015-01-21

2015-05-14

2015-09-04

2015-12-29

2016-04-22

2016-08-15

2016-12-06

2017-03-31

2017-07-25

2017-11-14

2018-03-12

2018-07-03

2018-10-24

2019-02-19

2019-06-12

2019-10-03

2020-01-28

2020-05-20

2020-09-11

2021-01-05

2021-04-29

2021-08-20

2021-12-13

2022-04-06

2022-08-01

2022-11-21

2023-03-17

2023-07-12

2023-11-01

2024-02-27

2024-06-20

2024-10-11

0

BZX

Finra

NASDAQ

NYSE

This figure represents daily total threshold securities by listing exchange. Historical Reg SHO threshold list data are currently provided by four major listing

exchanges: Nasdaq, NYSE, FINRA OTC, and BATS. Nasdaq files are available at

https://www.nasdaqtrader.com/trader.aspx?id=regshothreshold&os=io..&ref=app. NYSE data are avilable at https://www.nyse.com/regulation/thresholdsecurities. FINRA OTC data are available at https://otce.finra.org/otce/otcThreshold. BATS data are available at

https://www.cboe.com/us/equities/market_statistics/reg_sho_threshold/.

56

WORKING PAPER

Figure 1 Descriptive Statistics

This table contains descriptive statistics for Figure 1. Historical Reg SHO threshold list data are currently provided by four major listing exchanges: Nasdaq,

NYSE, FINRA OTC, and BATS. Nasdaq files are available at https://www.nasdaqtrader.com/trader.aspx?id=regshothreshold&os=io..&ref=app. NYSE data are

avilable at https://www.nyse.com/regulation/threshold-securities. FINRA OTC data are available at https://otce.finra.org/otce/otcThreshold. BATS data are

available at https://www.cboe.com/us/equities/market_statistics/reg_sho_threshold/.

Reg SHO Threshold List % Daily Totals by Exchange

Time Period

2005-2008

2009-2019

2020-2024

max

min

avg

stdev

max

min

avg

stdev

max

min

avg

stdev

BZX

0.00%

0.00%

0.00%

0.00%

14.86%

0.00%

0.09%

1.01%

25.40%

0.00%

10.54%

4.32%

Exchange

Finra

NASDAQ

0.00%

100.00%

0.00%

0.00%

0.00%

79.65%

0.00%

7.46%

71.74%

100.00%

0.00%

0.00%

15.55%

33.41%

18.23%

14.26%

62.22%

80.36%

0.00%

0.00%

26.31%

33.10%

8.45%

12.40%

Reg SHO Threshold List Daily Totals by Exchange

NYSE

100.00%

0.00%

20.35%

7.46%

85.57%

0.00%

50.95%

13.82%

55.61%

0.00%

30.05%

9.47%

57

BZX

12.00

0.07

0.79

29.00

7.82

4.24

Finra

72.00

13.78

16.25

76.00

20.29

11.11

Exchange

NASDAQ

386.00

224.75

62.43

74.00

31.09

14.19

58.00

23.17

7.94

NYSE

138.00

57.28

24.55

116.00

50.37

21.61

111.00

23.32

13.81

Total

514.00

12.00

282.02

82.53

188.00

12.00

95.32

26.03

215.00

27.00

74.61

25.21

WORKING PAPER

Figure 2

Reg SHO Threshold List - Daily Totals by Security Type, 2005-2024

Reg SHO Threshold List - Daily Totals by Security Type, 2005-2024

600

500

400

300

200

100

2005-01-07

2005-05-02

2005-08-22

2005-12-12

2006-04-05

2006-07-27

2006-11-15

2007-03-12

2007-07-02

2007-10-22

2008-02-13

2008-06-05

2008-09-25

2009-01-16

2009-05-11

2009-08-31

2009-12-21

2010-04-15

2010-08-05

2010-11-24

2011-03-18

2011-07-11

2011-10-28

2012-02-22

2012-06-13

2012-10-03

2013-01-25

2013-05-17

2013-09-09

2013-12-30

2014-04-23

2014-08-13

2014-12-03

2015-03-27

2015-07-20

2015-11-06

2016-03-02

2016-06-22

2016-10-12

2017-02-03

2017-05-26

2017-09-18

2018-01-09

2018-05-02

2018-08-22

2018-12-12

2019-04-05

2019-07-29

2019-11-15

2020-03-11

2020-07-01

2020-10-21

2021-02-12

2021-06-07

2021-09-27

2022-01-18

2022-05-10

2022-08-31

2022-12-21

2023-04-17

2023-08-08

2023-11-28

2024-03-21

0

ADR or GDR

Common

ETF

Mutual Fund

Preferred

Structured Product

Unit (Common + Warrant)

Unknown

Warrant

This figure represents daily total threshold securities by security type. Historical Reg SHO threshold list data are currently provided by four major listing

exchanges: Nasdaq, NYSE, FINRA OTC, and BATS. Nasdaq files are available at

https://www.nasdaqtrader.com/trader.aspx?id=regshothreshold&os=io..&ref=app. NYSE data are avilable at https://www.nyse.com/regulation/thresholdsecurities. FINRA OTC data are available at https://otce.finra.org/otce/otcThreshold. BATS data are available at

https://www.cboe.com/us/equities/market_statistics/reg_sho_threshold/. Security type are from CRSP and Compustat.

58

WORKING PAPER

Figure 2 Descriptive Statistics

This table contains descriptive statistics for Figure 2. Historical Reg SHO threshold list data are currently provided by four major listing exchanges: Nasdaq, NYSE, FINRA OTC, and BATS. Nasdaq files are available at

https://www.nasdaqtrader.com/trader.aspx?id=regshothreshold&os=io..&ref=app. NYSE data are avilable at https://www.nyse.com/regulation/threshold-securities. FINRA OTC data are available at https://otce.finra.org/otce/otcThreshold. BATS data are

available at https://www.cboe.com/us/equities/market_statistics/reg_sho_threshold/. Security type are from CRSP and Compustat.

Time Period

2005-2008

max

min

avg

2009-2019

stdev

max

min

avg

2020-2024

stdev

max

min

avg

stdev

Time Period

2005-2008

max

min

avg

2009-2019

stdev

max

min

avg

2020-2024

stdev

max

min

avg

stdev

ADR or GDR

16.92%

0.00%

5.77%

1.95%

63.83%

0.00%

12.23%

9.77%

44.44%

0.00%

15.47%

6.12%

ADR or GDR

38.00

16.34

7.34

63.00

11.05

8.64

37.00

11.53

5.87

Common

Common

75.00%

2.17%

50.09%

8.06%

51.35%

6.67%

22.13%

7.68%

63.27%

10.92%

31.39%

9.00%

318.00

1.00

145.28

58.90

43.00

1.00

20.11

6.51

74.00

5.00

22.86

9.16

ETF

ETF

Reg SHO Threshold List - Daily Totals % by Security Type, 2005-2024

42.34%

0.00%

5.03%

6.02%

79.66%

0.00%

50.97%

13.59%

69.44%

2.86%

40.44%

10.91%

Mutual Fund

2.90%

0.00%

0.53%

0.50%

2.90%

0.00%

0.22%

0.49%

4.60%

0.00%

0.22%

0.61%

Preferred

3.90%

0.00%

0.48%

0.52%

5.00%

0.00%

0.34%

0.69%

3.45%

0.00%

0.19%

0.53%

Structured Product Unit (Common + Warrant

6.17%

0.26%

0.00%

0.00%

1.11%

0.00%

0.83%

0.02%

13.43%

5.56%

0.00%

0.00%

1.49%

0.10%

1.66%

0.37%

3.47%

8.33%

0.00%

0.00%

0.24%

0.60%

0.60%

1.19%

Reg SHO Threshold List - Daily Totals by Security Type, 2005-2024

48.00

12.30

9.64

119.00

50.66

22.59

135.00

1.00

30.90

16.70

Mutual Fund

Preferred

7.00

1.43

1.27

3.00

0.21

0.48

4.00

0.16

0.47

59

9.00

1.29

1.23

5.00

0.32

0.65

3.00

0.16

0.44

Structured Product Unit (Common + Warrant

9.00

1.00

0.01

2.85

1.92

0.10

9.00

2.00

0.08

1.33

1.44

0.27

5.00

7.00

0.46

0.23

0.66

0.91

Unknown

78.26%

15.56%

36.85%

7.79%

63.16%

1.41%

12.15%

5.43%

25.00%

0.00%

10.33%

4.90%

Unknown

225.00

2.00

102.08

26.83

33.00

1.00

11.27

5.21

20.00

7.49

3.61

Warrant

Warrant

3.31%

0.00%

0.15%

0.34%

8.62%

0.00%

0.36%

0.83%

12.86%

0.00%

1.12%

1.58%

5.00

0.44

0.90

5.00

0.29

0.64

9.00

0.81

1.13

WORKING PAPER

Table 4

Reg SHO Threshold List - Top Common Stocks, 2005-2024

Data represent the U.S. common stocks with the longest duration on the Regulation SHO Threshold List for the period from 2005 through 2024. Market cap data are determined by

pairing the ticker symbol and threshold dates from the various listing exchanges with data from the Center for Research on Securities Prices and Compustat. "First Day" represents the

first date on a Reg SHO Threshold List. "Last Day" represents the last date on a Reg SHO Threshold List.

#

Ticker Days Name

First Day

Last Day

Exchange CUSIP

Max MktCap (m Avg MktCap (m Max FTDs (m)

1 OSTK

921 OVERSTOCK COM INC DEL

1/27/2005 9/23/2019 NASDAQ 690370101

$1,896.74

$518.78

$32.00

2 MDTL

865 MEDIS TECHNOLOGIES LTD

3/29/2005 10/21/2008 NASDAQ 58500P107

$709.88

$361.40

$39.12

3 AVTO

824 AVANTOGEN ONCOLOGY, INC. COMMON STOCK

7/18/2013 10/26/2016 Finra

05350Y100

$0.05

4 PEIX

759 PACIFIC ETHANOL, INC. NEW

1/7/2005

3/2/2012 NASDAQ 69423U206

$663.63

$315.57

$15.15

5 NFI

711 NOVASTAR FINANCIAL, INC.

1/7/2005 1/16/2008 NYSE

669947889

$378.90

$140.55

$100.44

6 TRLG

689 TRUE RELIGION APPAREL INC

8/18/2005 10/21/2008 NASDAQ 89784N104

$758.32

$510.14

$43.83

7 KKD

645 KRISPY KREME DOUGHNUTS, INC.

1/7/2005

2/1/2008 NYSE

501014104

$707.58

$296.75

$11.35

8 NFLX

641 NETFLIX COM INC

1/7/2005 10/6/2008 NASDAQ 64110L106

$2,505.09

$1,691.43

$60.06

9 FFH

614 FAIRFAX FINANCIAL HOLDINGS LIMITED

1/7/2005 10/2/2008 NYSE

303901102

$5,845.23

$4,060.44

$105.77

10 LZB

586 LA-Z-BOY INCORPORATED

11/28/2005 10/21/2008 NYSE

505336107

$611.33

$416.86

$9.88

11 SPWR

584 SUNPOWER CORP COM STK (DE)

12/12/2005 8/14/2024 NASDAQ 867652406

$5,249.11

$2,682.69

$174.89

12 ZOLT

578 ZOLTEK COMPANIES INC

1/7/2005 10/22/2008 NASDAQ 98975W104

$1,540.00

$967.44

$43.43

13 TASR

576 TASER INTERNATIONAL INC

1/7/2005

7/7/2008 NASDAQ 87651B104

$1,186.05

$798.35

$35.17

14 AURC

554 AURUS CORP. COMMON STOCK

12/19/2005

6/7/2011 NASDAQ 05208R109

$6.03

$2.90

$0.36

15 CMG

544 CHIPOTLE MEXICAN GRILL, INC.

2/6/2006 10/30/2008 NYSE

169656105

$2,206.48

$1,381.53

$246.70

16 MSO

538 MARTHA STEWART LIVING OMNIMEDIA, INC.

1/7/2005 10/21/2008 NYSE

573083102

$253.23

$211.73

$4.15

17 AGEN

499 ANTIGENICS INC. (DEL)

1/7/2005

2/4/2010 NASDAQ 037032109

$151.43

$116.34

$5.22

18 SPDC

488 SPEED COMMERCE, INC COM STK

1/7/2005 8/12/2015 NASDAQ 84764T106

$155.68

$54.16

$1.89

19 NAT

487 NORDIC AMERICAN TANKER SHIPPING

1/7/2005 4/28/2009 NYSE

G65773106

$1,406.54

$1,114.03

$23.99

20 MTTCF 475 MEATTECH 3D LTD COMMON SHARES

8/12/2020 6/30/2022 Finra

M6S89X179

$282.92

$90.68

$2.52

21 CDID

472 QUAD ENERGY CORP. COMMON STOCK

1/2/2013 11/13/2014 NASDAQ 74734A204

22 AGIX

469 ATHEROGENICS INC

1/3/2006 10/13/2008 NASDAQ 047439104

$152.45

$56.58

$39.64

23 BRLC

460 SYNTAX-BRILLIAN CORPORATION

7/22/2005 7/18/2008 NASDAQ 87163L103

$632.73

$312.02

$22.12

24 OSIR

453 OSIRIS THERAPEUTICS INC NEW COMMON STOCK

8/18/2006 4/17/2017 Finra

68827R108

$636.80

$396.67

$11.17

25 DSTI

448 DAYSTAR TECH INC COM STK (DE)

1/7/2005

4/8/2011 NASDAQ 23962Q308

$119.07

$62.75

$2.26

26 RVXCF 444 RESVERLOGIX CORP COMMON STOCK

1/16/2007 7/14/2022 Finra

76128M108

$535.32

$245.31

$2.80

27 AERG

436 APPLIED ENERGETICS, INC

4/1/2005 6/13/2008 NASDAQ 03819M106

$439.06

$261.93

$6.64

28 TGMGF 435 THETA GOLD MINES LTD ORDINARY SHARES AUSTRALIA 9/11/2020 5/10/2023 Finra

Q86618107

$0.22

29 FLIP

433 FTS GROUP INC

1/21/2005 10/7/2008 NASDAQ 30266R106

$3.95

$2.98

$0.07

30 CORS

430 CORUS BANKSHARES INC

5/15/2006 10/23/2008 NASDAQ 220873103

$1,070.94

$579.91

$36.55

31 WCI

424 WCI COMMUNITIES, INC.

8/14/2006

8/4/2008 NYSE

92923C104

$937.70

$314.00

$39.60

32 CTIC

419 CELL THERAPEUTICS INC COM STK

3/15/2005 10/22/2012 NASDAQ 150934883

$243.96

$125.15

$3.37

33 MMNFF 418 MEDMEN ENTERPRISES INC ORDINARY SHARES (CANADA 6/15/2018

4/8/2022 Finra

58507M107

$509.66

$179.68

$14.90

34 USNA

416 USANA HEALTH SCIENCES

5/30/2006 12/12/2017 NYSE

90328M107

$1,763.71

$605.59

$93.12

35 MBVX 412 MABVAX THERAPEUTICS HOLDINGS,

12/22/2006 8/10/2017 NASDAQ 55414P504

$327.35

$119.13

$4.07

36 DNDN 408 DENDREON CORPORATION

3/21/2007 11/6/2013 NASDAQ 24823Q107

$1,941.96

$612.67

$219.41

37 NILE

407 BLUE NILE INC

2/18/2005 8/15/2012 NASDAQ 09578R103

$1,512.47

$773.33

$86.74

38 NTRI

406 NUTRI/SYSTEM INC.

2/21/2007 10/28/2008 NASDAQ 67069D108

$2,498.87

$1,072.57

$159.46

39 MWA

395 MUELLER WATER PRODUCTS, INC.

7/3/2006 10/22/2008 NYSE

624758108

$559.62

$310.97

$43.83

40 CCC

393 CALGON CARBON CORPORATION

8/23/2006 10/21/2008 NYSE

129603106

$905.05

$596.44

$11.32

41 NVEC

393 NVE CORPORATION NEW

1/7/2005 10/2/2008 NASDAQ 629445206

$188.85

$145.15

$2.27

42 HTE

391 HARVEST ENERGY TRUST

8/11/2006 11/25/2008 NYSE

41752X101

$4,224.23

$3,303.28

$8.42

43 NFLD

391 NORTHFIELD LABORATORIES INC

1/7/2005 9/26/2007 NASDAQ 666135108

$146.15

$64.59

$7.12

44 CALM

391 CAL-MAINE FOODS INC

1/7/2005 10/29/2008 NASDAQ 128030202

$1,015.76

$704.28

$145.07

45 WBMD 386 WEBMD HEALTH CORP CL A

11/3/2005 10/8/2008 NASDAQ 94770V102

$488.77

$307.63

$37.55

46 GLBC

383 GLOBAL CROSSING LTD NEW (BERMU

1/7/2005 12/20/2006 NASDAQ G3921A175

47 BHS

383 BROOKFIELD HOMES CORPORATION

6/14/2006 10/21/2008 NYSE

112723101

$961.27

$525.68

$11.65

48 ABLE

383 ABLE ENERGY INC

3/10/2005 9/29/2006 NASDAQ 003709102

49 BYND

382 BEYOND MEAT INC COM (DE)

6/11/2019

7/8/2024 NASDAQ 08862E109

$14,135.81

$3,041.83

$203.17

50 IRBT

381 IROBOT CORPORATION

12/28/2005 10/2/2008 NASDAQ 462726100

$589.61

$409.45

$10.09

60

WORKING PAPER

Table 5

Reg SHO Threshold List - Top Common Stocks (with 2024 date)

Data represent the U.S. common stocks with the longest duration on the Regulation SHO Threshold List for the period from 2005 through 2024, and which have a threshold date in 2024.

Market cap data are determined by pairing the ticker symbol and threshold dates from the various listing exchanges with data from the Center for Research on Securities Prices and

Compustat. "First Day" represents the first date on a Reg SHO Threshold List. "Last Day" represents the last date on a Reg SHO Threshold List.

# Ticker Days Name

Exchange CUSIP

First Day

Last Day

Max MktCap (m) Avg MktCap (m Max FTDs (m)

1 SPWR 584 SUNPOWER CORP COM STK (DE)

12/12/2005 8/14/2024 NASDAQ 867652406 $5,249.11

$2,682.69

$174.89

BEYOND

MEAT

INC

COM

(DE)

2 BYND 382

6/11/2019 7/8/2024 NASDAQ 08862E109 $14,135.81

$3,041.83

$203.17

3 ASTI 335 ASCENT SOLAR TECHNOLOGIES INC

3/30/2007 8/29/2024 NASDAQ 043635804 $305.91

$106.19

$11.90

4 MULN 324 MULLEN AUTOMOTIVE INC COM PAR

10/23/2017 12/27/2024 NASDAQ 62526P505 $828.78

$121.66

$26.14

5 AFMJF 297 ALPHAMIN RESOURCES CORP CLEAN SHARES (MAURI 10/21/2020 12/2/2024 Finra

V0195Q103 $1,386.33

$770.32

$2.05

1/4/2022 3/11/2024 Finra

Q69170134

$0.31

6 NVAAF 267 NOVA MINERALS LTD. ORDINARY SHARES

7 FFIE 266 FARADAY FUTURE INTELLIGENT ELE

4/14/2021 12/20/2024 NASDAQ 307359885 $1,793.84

$480.71

$36.41

8 ANY 198 SPHERE 3D CORP NEW COM NO PAR

3/21/2016 6/26/2024 NASDAQ 84841L407 $212.27

$27.46

$16.77

9 NUWE 188 NUWELLIS INC COM PAR $0.0001

7/19/2012 12/4/2024 NASDAQ 67113Y603 $71.82

$5.88

$4.19

RECONNAISSANCE

ENERGY

AFRICA

LTD

COMMON

SH

10 RECAF 187

7/24/2020 7/31/2024 Finra

75624R108 $1,690.65

$642.16

$6.30

11 AYRO 182 AYRO INC COM NEW

4/15/2005 6/17/2024 NASDAQ 054748207 $33.14

$8.95

$7.94

12 FCEL 182 FUELCELL ENERGY INC COM NEW

1/27/2005 12/11/2024 NASDAQ 35952H700 $618.85

$185.53

$11.02

13 DGLY 179 DIGITAL ALLY INC NEW COM NEW

7/21/2014 9/3/2024 NASDAQ 25382T200 $145.70

$40.66

$5.90

14 DJT

179 TRUMP MEDIA & TECHNOLOGY GROUP

12/10/2021 7/9/2024 NASDAQ 25400Q105 $9,610.77

$3,284.23

$118.91

15 WINT 176 WINDTREE THERAPEUTICS INC COM

6/16/2006 9/20/2024 NASDAQ 97382D501 $280.40

$160.68

$8.23

16 CYCC 169 CYCLACEL PHARMACEUTICALS INC C

5/9/2005 6/7/2024 NASDAQ 23254L801 $58.98

$27.75

$4.39

17 BIOL 166 BIOLASE INC COM PAR $.001 NEW

1/7/2005 3/5/2024 NASDAQ 090911702 $83.23

$17.54

$2.81

18 SINT 156 SINTX TECHNOLOGIES INC COM PAR

12/8/2014 6/11/2024 NASDAQ 829392703 $36.82

$11.32

$1.17

19 IVP

156 INSPIRE VETERINARY PARTNERS IN

12/22/2023 12/2/2024 NASDAQ 45784E205 $21.80

$5.16

$2.72

20 USAU 151 U S GOLD CORP COM NEW

10/7/2015 12/3/2024 NASDAQ 90291C201 $89.95

$8.71

$0.79

MYMD

PHARMACEUTICALS

INC

COM

N

21 MYMD 146

7/14/2017 4/22/2024 NASDAQ 62856X201 $73.47

$22.98

$0.93

22 WHLR 144 WHEELER REAL ESTATE INVT TR IN

9/5/2013 12/24/2024 NASDAQ 963025846 $25.96

$7.68

$2.39

23 TBLT 143 TOUGHBUILT INDS INC COM PAR $.

3/4/2019 8/7/2024 NASDAQ 89157G868 $62.37

$18.28

$6.87

24 NKLA 138 NIKOLA CORP COM NEW

6/11/2020 12/27/2024 NASDAQ 654110303 $27,089.38

$5,477.91

$279.72

25 IVCTF 138 INVICTUS ENERGY LTD ORDINARY SHARES

8/2/2022 2/7/2024 Finra

Q496BG104

$1.01

26 DBGI 130 DIGITAL BRANDS GROUP INC COM P

6/30/2021 12/4/2024 NASDAQ 25401N408 $65.94

$10.19

$2.97

27 BKYI 129 BIO-KEY INTL INC COM PAR $0.00

1/21/2005 11/12/2024 NASDAQ 09060C507 $4.04

$1.68

$0.44

28 FRGT 127 FREIGHT TECHNOLOGIES INC SHS N

9/15/2021 10/21/2024 NASDAQ G51413139 $18.26

$4.57

$1.59

MSP

RECOVERY

INC

CL

A

PAR

0.00

29 MSPR 124

6/2/2022 12/27/2024 NASDAQ 553745308 $165.13

$29.34

$3.12

30 BKKT 123 BAKKT HOLDINGS, INC.

11/2/2021 5/20/2024 NYSE

05759B305 $979.79

$353.83

$132.91

31 YLLXF 121 YELLOW CAKE PLC ORDINARY SHARES

1/19/2023 4/19/2024 Finra

G98334108 $2,114.35

$1,409.81

$1.11

32 JAGX 121 JAGUAR HEALTH INC COM PAR $0.0

5/22/2015 6/24/2024 NASDAQ 47010C805 $65.21

$22.17

$1.10

33 SPCB 118 SUPERCOM LTD NEW ORD SH PAR VA

1/7/2008 9/25/2024 NASDAQ M87095309 $163.02

$14.52

$1.78

34 SCPX 114 SCORPIUS HOLDINGS, INC.

3/29/2016 8/23/2024 NYSE

42237K508 $59.72

$24.40

$2.16

35 UAVS 112 AGEAGLE AERIAL SYSTEMS, INC.

10/4/2018 12/27/2024 NYSE

00848K309 $390.98

$77.12

$7.05

36 PEGY 109 PINEAPPLE ENERGY INC COM PAR $

10/13/2022 11/7/2024 NASDAQ 72303P404 $49.82

$15.63

$2.83

37 GOVX 109 GEOVAX LABS INC COM PAR $0.001

12/21/2020 8/1/2024 NASDAQ 373678606 $96.50

$29.01

$6.52

38 SYTA 109 SIYATA MOBILE INC COM NO PAR

11/2/2021 6/12/2024 NASDAQ 83013Q707 $21.48

$9.17

$1.34

39 CGC 108 CANOPY GROWTH CORP COM NEW (CA

1/23/2023 7/12/2024 NASDAQ 138035704 $1,553.96

$672.43

$58.57

BIODEXA

PHARMACEUTICALS

INC

SP

40 BDRX 108

3/6/2019 6/4/2024 NASDAQ 59564R708 $8.04

$3.84

$0.98

41 ADTX 107 ADITXT INC COM PAR $0.001 NEW

1/3/2022 12/27/2024 NASDAQ 007025703 $25.93

$6.81

$2.25

42 ATNF 103 180 LIFE SCIENCES CORP COM NEW

12/18/2020 1/30/2024 NASDAQ 68236V203 $365.61

$128.34

$3.66

43 LGMK 102 LOGICMARK INC COM PAR$ NEW 04/

1/28/2016 11/6/2024 NASDAQ 67091J503 $90.33

$27.48

$4.14

44 MTEM 98 MOLECULAR TEMPLATES INC COM NE

2/28/2005 10/30/2024 NASDAQ 608550208 $95.17

$66.18

$4.28

45 CMND 96 CLEARMIND MEDICINE INC COM NEW

4/12/2023 7/24/2024 NASDAQ 185053402 $7.40

$4.15

$0.60

46 ABIO 93 ARCA BIOPHARMA INC COM PAR $.0

6/10/2009 4/17/2024 NASDAQ 00211Y506 $47.42

$21.38

$2.00

47 SMX 92 SMX SEC MATTERS PLC SHS CL A N

3/16/2023 11/26/2024 NASDAQ G8267K208 $63.00

$8.14

$0.87

SELLAS

LIFE

SCIENCES

GROUP

INC

48 SLS

92

4/1/2008 8/6/2024 NASDAQ 81642T209 $311.59

$85.66

$6.89

49 CNSP 91 CNS PHARMACEUTICALS INC. COM C

4/26/2023 11/14/2024 NASDAQ 18978H300 $11.10

$4.88

$0.35

50 VLCN 89 VOLCON INC COM PAR $0.00001 NE

10/26/2021 12/4/2024 NASDAQ 92864V509 $148.64

$15.73

$3.61

61

WORKING PAPER

Table 6

Reg SHO Threshold List - Top ETFs, 2005-2024

Data represent the U.S. Exchange Traded Funds (ETFs) with the longest duration on the Regulation SHO Threshold List for the period from 2005 through 2024. Market cap data are determined

by pairing the ticker symbol and threshold dates from the various listing exchanges with data from the Center for Research on Securities Prices and Compustat. "First Day" represents the first

date on a Reg SHO Threshold List. "Last Day" represents the last date on a Reg SHO Threshold List.

# Ticker Days Name

First Day

Last Day

Exchange CUSIP

Max MktCap (m Avg MktCap (m Max FTDs (m)

1 XRT 1691 SPDR S&P RETAIL ETF

12/30/2008 12/27/2024 NYSE

78464A714 $1,354.66

$544.97

$481.16

2 DUST 1627 DIREXION DAILY GOLD MINERS INDEX BEAR 2X SHARES

2/2/2011

10/15/2024 NYSE

25460G880 $927.73

$140.27

$45.17

3 TMF 1583 DIREXION DAILY 20+ YEAR TREASURY BULL 3X SHARES (BASED O12/16/2009 8/18/2022 NYSE

25459W540 $456.39

$98.24

$34.45

4 ERY 1460 DIREXION DAILY ENERGY BEAR 2X SHARES

12/5/2008 8/28/2023 NYSE

25460G179 $176.71

$57.62

$22.15

5 EDZ 1381 DIREXION DAILY EMERGING MARKETS BEAR 3X SHARES

2/12/2009 8/31/2023 NYSE

25460E547 $253.49

$106.92

$29.74

6 UVXY 1294 PROSHARES ULTRA VIX SHORT-TERM FUTURES ETF

11/7/2011 12/26/2024 BZX

74347Y755 $2,547.92

$392.26

$134.11

7 JDST 1245 DIREXION DAILY JUNIOR GOLD MINERS INDEX BEAR 2X SHARES 5/13/2014 12/23/2024 NYSE

25461A577 $509.59

$79.78

$61.64

8 TNA 1223 DIREXION DAILY SMALL CAP BULL 3X SHARES

5/22/2009 12/27/2024 NYSE

25459W847 $2,296.13

$680.43

$154.58

9 SRTY 1216 PROSHARES ULTRAPRO SHORT RUSSELL2000

5/13/2010 4/16/2024 NYSE

74347G390 $207.15

$72.72

$20.67

10 FAZ 1194 DIREXION DAILY FINANCIAL BEAR 3X SHARES

1/12/2009 12/27/2024 NYSE

25460E240 $1,467.92

$611.85

$140.91

11 SOXS 1079 DIREXION DAILY SEMICONDUCTOR BEAR 3X SHARES

9/29/2010 5/16/2024 NYSE

25460G112 $835.22

$82.09

$69.03

12 LABD 1070 DIREXION DAILY S&P BIOTECH BEAR 3X SHARES

9/15/2015 12/27/2024 NYSE

25460G716 $198.48

$76.73

$14.44

13 SCO 1013 PROSHARES ULTRASHORT BLOOMBERG CRUDE OIL

2/24/2009 5/25/2021 NYSE

74347W668 $421.74

$134.65

$90.93

14 ZSL 970 PROSHARES ULTRASHORT SILVER

2/26/2009 10/25/2024 NYSE

74347Y847 $720.32

$94.63

$50.64

15 XOP 940 SPDR S&P OIL & GAS EXPLORATION & PRODUCTION ETF

3/11/2009 3/28/2023 NYSE

78468R556 $3,490.70

$1,080.01

$472.07

16 TZA 914 DIREXION DAILY SMALL CAP BEAR 3X SHARES

12/3/2008 12/27/2024 NYSE

25460E232 $1,134.75

$544.62

$120.71

17 SMH 907 VANECK VECTORS ETF TR SEMICOND

1/17/2012 6/18/2020 NASDAQ 92189F676 $2,271.99

$544.35

$329.77

18 TWM 823 PROSHARES ULTRASHORT RUSSELL2000

11/10/2008 11/20/2024 NYSE

74347G168 $677.97

$236.08

$38.41

19 FAS 815 DIREXION FINANCIAL BULL 3X SHARES

4/23/2009 2/14/2014 NYSE

25459Y694 $3,420.96

$1,532.70

$134.56

20 SQQQ 792 PROSHARES TR ULTRAPRO SHORT QQ

4/6/2010

12/3/2024 NASDAQ 74347G192 $2,158.40

$214.79

$52.65

21 UWM 773 PROSHARES ULTRA RUSSELL2000

10/15/2009 8/3/2020

NYSE

74347R842 $676.95

$213.91

$225.18

22 URTY 767 PROSHARES ULTRAPRO RUSSELL2000

5/13/2010 7/17/2020 NYSE

74347X799 $241.90

$108.38

$21.03

23 FXE 747 INVESCO CURRENCYSHARES EURO CURRENCY TRUST

1/27/2006 5/7/2024

NYSE

46138K103 $974.03

$338.36

$236.83

24 SPXL 732 DIREXION DAILY S&P 500 BULL 3X SHARES

5/6/2009

9/30/2020 NYSE

25459W862 $1,404.86

$306.50

$70.99

25 DRV 695 DIREXION DAILY REAL ESTATE BEAR 3X SHARES

8/5/2009

5/9/2022

NYSE

25460G419 $109.66

$33.45

$10.93

26 DRIP 687 DIREXION DAILY S&P OIL & GAS EXP. & PROD. BEAR 2X SHARES 3/8/2016

8/8/2023

NYSE

25460G328 $1,048.72

$46.59

$37.93

27 DUG 684 PROSHARES ULTRASHORT ENERGY

12/29/2008 4/9/2024

NYSE

74347G358 $564.43

$83.88

$18.06

28 ERX 669 DIREXION DAILY ENERGY BULL 3X SHARES

11/26/2008 3/19/2020 NYSE

25459W888 $633.17

$260.58

$27.86

29 RUSS 669 DIREXION DAILY RUSSIA BEAR 3X SHARES

1/27/2012 3/18/2020 NYSE

25460E828 $76.24

$32.10

$7.97

30 TMV 651 DIREXION DAILY 20+ YEAR TREASURY BEAR 3X SHARES (BASED O12/22/2009 3/12/2024 NYSE

25460G849 $675.61

$324.77

$222.29

31 TECS 650 DIREXION DAILY TECHNOLOGY BEAR 3X SHARES

5/5/2009

9/5/2024

NYSE

25460G393 $115.43

$34.56

$9.65

32 EDC 647 DIREXION DAILY EMERGING MARKETS BULL 3X SHARES

3/6/2009

7/1/2020

NYSE

25490K281 $887.05

$283.83

$56.13

33 SVXY 624 PROSHARES SHORT VIX SHORT-TERM FUTURES ETF

11/10/2011 10/18/2023 BZX

74347W130 $962.21

$215.73

$45.88

34 VIXY 607 PROSHARES VIX SHORT-TERM FUTURES ETF

4/14/2011 9/4/2024

BZX

74347Y789 $1,219.50

$275.61

$36.25

35 VCSH 591 VANGUARD SHT-TERM CORP BD ETF

12/10/2009 3/19/2014 NASDAQ 92206C409 $80.67

$75.95

$62.03

36 SPXS 589 DIREXION DAILY S&P 500 BEAR 3X SHARES

12/2/2008 11/21/2024 NYSE

25460E265 $794.97

$192.12

$32.71

37 USO 580 UNITED STATES OIL FUND, LP

7/27/2009 9/8/2023

NYSE

91232N207 $2,571.99

$1,409.94

$225.43

38 UCO 567 PROSHARES ULTRA BLOOMBERG CRUDE

11/6/2009 2/27/2020 NYSE

74347W247 $1,164.47

$330.04

$37.75

39 IYR

558 ISHARES DOW JONES US REAL ESTATE INDEX FUND

1/30/2006 2/12/2018 NYSE

464287739 $6,279.06

$3,603.18

$648.99

40 SPXU 529 PROSHARES ULTRAPRO SHORT S&P 500

7/13/2009 5/14/2024 NYSE

74349Y845 $697.57

$407.58

$44.92

41 XME 527 SPDR S&P METALS & MINING ETF

7/29/2009 7/6/2021

NYSE

78464A755 $2,195.60

$668.53

$152.66

42 YANG 521 DIREXION DAILY FTSE CHINA BEAR 3X SHARES

4/7/2010

12/16/2024 NYSE

25461A460 $216.58

$56.46

$22.68

43 IYT

516 ISHARES DOW JONES TRANSPORTATION AVERAGE INDEX FUND 2/6/2006

9/27/2016 NYSE

464287192 $975.04

$539.52

$101.42

44 DRN 508 DIREXION DAILY REAL ESTATE BULL 3X SHARES

9/8/2009

4/28/2020 NYSE

25459W755 $190.28

$111.04

$13.89

45 SKF 490 PROSHARES ULTRASHORT FINANCIALS

10/31/2008 11/3/2021 NYSE

74347G713 $1,735.28

$338.24

$209.81

46 UPRO 489 PROSHARES ULTRAPRO S&P 500

7/13/2009 7/18/2016 NYSE

74347X864 $780.78

$295.38

$42.61

47 TQQQ 477 PROSHARES ULTRAPRO QQQ

2/25/2010 11/21/2016 NASDAQ 74347X831 $1,419.97

$368.95

$38.08

48 EFZ 470 PROSHARES TRUST SHORT MSCI EAFE

2/10/2010 8/22/2024 NYSE

74347R370 $281.20

$107.02

$21.56

49 DOG 466 PROSHARES SHORT DOW30

10/31/2008 5/21/2021 NYSE

74347B235 $467.95

$256.43

$26.50

50 FXY 460 INVESCO CURRENCYSHARES JAPANESE YEN TRUST

4/26/2007 5/19/2023 NYSE

46138W107 $650.45

$216.45

$66.55

62

WORKING PAPER

Table 7

Reg SHO Threshold List - Top ETFs (with 2024 Date)

Data represent the U.S. Exchange Traded Funds (ETFs) with the longest duration on the Regulation SHO Threshold List for the period from 2005 through 2024, and which have a threshold

date in 2024. Market cap data are determined by pairing the ticker symbol and threshold dates from the various listing exchanges with data from the Center for Research on Securities Prices

and Compustat. "First Day" represents the first date on a Reg SHO Threshold List. "Last Day" represents the last date on a Reg SHO Threshold List.

Ticker Days Name

First Day

Last Day

Exchange CUSIP

Max MktCap (m Avg MktCap (m Max FTDs (m)

1 XRT 1691 SPDR S&P RETAIL ETF

12/30/2008 12/27/2024 NYSE

78464A714

$1,354.66

$544.97

$481.16

2 DUST 1627 DIREXION DAILY GOLD MINERS INDEX BEAR 2X SHARES

2/2/2011 10/15/2024 NYSE

25460G880

$927.73

$140.27

$45.17

3 UVXY 1294 PROSHARES ULTRA VIX SHORT-TERM FUTURES ETF

11/7/2011 12/26/2024 BZX

74347Y755

$2,547.92

$392.26

$134.11

4 JDST 1245 DIREXION DAILY JUNIOR GOLD MINERS INDEX BEAR 2X SHARE 5/13/2014 12/23/2024 NYSE

25461A577

$509.59

$79.78

$61.64

5 TNA 1223 DIREXION DAILY SMALL CAP BULL 3X SHARES

5/22/2009 12/27/2024 NYSE

25459W847

$2,296.13

$680.43

$154.58

6 SRTY 1216 PROSHARES ULTRAPRO SHORT RUSSELL2000

5/13/2010 4/16/2024 NYSE

74347G390

$207.15

$72.72

$20.67

7 FAZ

1194 DIREXION DAILY FINANCIAL BEAR 3X SHARES

1/12/2009 12/27/2024 NYSE

25460E240

$1,467.92

$611.85

$140.91

8 SOXS 1079 DIREXION DAILY SEMICONDUCTOR BEAR 3X SHARES

9/29/2010 5/16/2024 NYSE

25460G112

$835.22

$82.09

$69.03

9 LABD 1070 DIREXION DAILY S&P BIOTECH BEAR 3X SHARES

9/15/2015 12/27/2024 NYSE

25460G716

$198.48

$76.73

$14.44

10 ZSL

970 PROSHARES ULTRASHORT SILVER

2/26/2009 10/25/2024 NYSE

74347Y847

$720.32

$94.63

$50.64

11 TZA

914 DIREXION DAILY SMALL CAP BEAR 3X SHARES

12/3/2008 12/27/2024 NYSE

25460E232

$1,134.75

$544.62

$120.71

12 TWM 823 PROSHARES ULTRASHORT RUSSELL2000

11/10/2008 11/20/2024 NYSE

74347G168

$677.97

$236.08

$38.41

13 SQQQ 792 PROSHARES TR ULTRAPRO SHORT QQ

4/6/2010 12/3/2024 NASDAQ 74347G192

$2,158.40

$214.79

$52.65

14 FXE

747 INVESCO CURRENCYSHARES EURO CURRENCY TRUST

1/27/2006

5/7/2024 NYSE

46138K103

$974.03

$338.36

$236.83

15 DUG

684 PROSHARES ULTRASHORT ENERGY

12/29/2008

4/9/2024 NYSE

74347G358

$564.43

$83.88

$18.06

16 TMV

651 DIREXION DAILY 20+ YEAR TREASURY BEAR 3X SHARES (BASED 12/22/2009 3/12/2024 NYSE

25460G849

$675.61

$324.77

$222.29

17 TECS

650 DIREXION DAILY TECHNOLOGY BEAR 3X SHARES

5/5/2009

9/5/2024 NYSE

25460G393

$115.43

$34.56

$9.65

18 VIXY

607 PROSHARES VIX SHORT-TERM FUTURES ETF

4/14/2011

9/4/2024 BZX

74347Y789

$1,219.50

$275.61

$36.25

19 SPXS

589 DIREXION DAILY S&P 500 BEAR 3X SHARES

12/2/2008 11/21/2024 NYSE

25460E265

$794.97

$192.12

$32.71

20 SPXU 529 PROSHARES ULTRAPRO SHORT S&P 500

7/13/2009 5/14/2024 NYSE

74349Y845

$697.57

$407.58

$44.92

21 YANG 521 DIREXION DAILY FTSE CHINA BEAR 3X SHARES

4/7/2010 12/16/2024 NYSE

25461A460

$216.58

$56.46

$22.68

22 EFZ

470 PROSHARES TRUST SHORT MSCI EAFE

2/10/2010 8/22/2024 NYSE

74347R370

$281.20

$107.02

$21.56

23 PSQ

449 PROSHARES SHORT QQQ

5/1/2009 2/20/2024 NYSE

74347B714

$1,013.05

$393.16

$91.18

24 KRE

443 SPDR S&P REGIONAL BANKING ETF

10/31/2008 6/11/2024 NYSE

78464A698

$4,495.90

$1,298.27

$274.34

25 KOLD 417 PROSHARES ULTRASHORT BLOOMBERG NATURAL GAS

1/30/2013 12/27/2024 NYSE

74347Y813

$627.84

$99.53

$54.32

26 EUM

411 PROSHARES TRUST SHORT MSCI EMERGING MARKETS

3/3/2009 4/24/2024 NYSE

74347R396

$490.96

$184.29

$19.58

27 FXA

385 INVESCO CURRENCYSHARES AUSTRALIAN DOLLAR TRUST

8/14/2006 1/26/2024 NYSE

46090N103

$855.43

$317.68

$55.59

28 TBF

377 PROSHARES SHORT 20+ YEAR TREASURY ETF

9/9/2009 9/25/2024 NYSE

74347X849

$1,541.80

$399.15

$44.95

29 UVIX

317 2X LONG VIX FUTURES ETF

4/21/2022 8/22/2024 BZX

92891H507

$171.95

$64.22

$10.14

30 GLL

300 PROSHARES ULTRASHORT GOLD

9/1/2009 4/16/2024 NYSE

74347W395

$168.06

$82.94

$12.02

31 RWM 290 PROSHARES SHORT RUSSELL2000

10/28/2009 12/27/2024 NYSE

74348A210

$520.35

$299.74

$25.17

32 JNUG 276 DIREXION DAILY JUNIOR GOLD MINERS INDEX BULL 2X SHARES 4/4/2014

1/2/2024 NYSE

25460G831

$1,083.14

$423.32

$77.03

33 EWQ 262 ISHARES MSCI FRANCE ETF

2/13/2006 7/10/2024 NYSE

464286707

$823.90

$393.67

$69.66

34 FRI

237 FIRST TRUST S&P REIT INDEX FUND

8/5/2009 9/17/2024 NYSE

33734G108

$453.64

$156.81

$24.49

35 SVIX

226 -1X SHORT VIX FUTURES ETF

4/7/2022 4/19/2024 BZX

92891H101

$200.22

$75.63

$16.62

36 QABA 213 FIRST TRUST NASDAQ ABA COMMUNI

5/6/2010

1/4/2024 NASDAQ 33736Q104

$412.18

$153.69

$6.96

37 MYY

201 PROSHARES SHORT MIDCAP400

2/13/2009

7/2/2024 NYSE

74347B250

$81.78

$27.44

$27.64

38 SSG

201 PROSHARES ULTRASHORT SEMICONDUCTORS

3/3/2009 4/17/2024 NYSE

74349Y860

$37.71

$15.32

$4.02

39 HAP

199 VANECK NATURAL RESOURCES ETF

11/7/2008 5/31/2024 NYSE

92189F841

$156.92

$82.04

$12.36

40 TBX

197 PROSHARES SHORT 7-10 YEAR TREASURY

3/19/2013 1/12/2024 NYSE

74348A608

$107.58

$47.63

$10.72

41 SEF

195 PROSHARES SHORT FINANCIALS

5/4/2009

3/5/2024 NYSE

74347B185

$181.90

$63.91

$6.34

42 JXI

193 ISHARES GLOBAL UTILITIES ETF

10/24/2006 9/16/2024 NYSE

464288711

$331.72

$114.56

$19.54

43 SPDN 175 DIREXION DAILY S&P 500 BEAR 1X SHARES

7/28/2016 12/26/2024 NYSE

25460E869

$260.21

$128.82

$12.22

44 FRTY

169 ALGER MID CAP 40 ETF

4/9/2021 8/28/2024 NYSE

015564107

$45.38

$30.70

$3.30

45 KIE

162 SPDR S&P INSURANCE ETF

2/10/2009

6/7/2024 NYSE

78464A789

$741.82

$232.83

$21.16

46 CNXT 157 VANECK CHINEXT ETF

4/9/2015 10/18/2024 NYSE

92189F627

$98.60

$43.85

$12.82

47 TBT

155 PROSHARES TRUST ULTRASHORT LEHMAN 20+ YEAR TREASUR 3/17/2016 3/27/2024 NYSE

74347B201

$2,177.27

$1,242.07

$54.19

48 JPEM 143 JPMORGAN DIVERSIFIED RETURN EMERGING MARKETS EQUIT 7/14/2016 6/10/2024 NYSE

46641Q308

$339.14

$132.22

$13.12

49 FCVT 132 FIRST TR EXCHANGE TRADED FD IV

12/1/2016 11/12/2024 NASDAQ 33739Q507

$337.72

$140.94

$8.60

50 NVDQ 124 T-REX 2X INVERSE NVIDIA DAILY TARGET ETF

2/16/2024 12/26/2024 BZX

26923N488

$68.00

$21.94

$4.92

#

63

WORKING PAPER

Fugure 3

Reg SHO Threshold List - Total SHO Securities by Type, 2005-2024

Total SHO Securities by Type, 2005-2024

1.08%

0.47%

21.91%

1.46%

8.82%

0.48%

0.75%

44.44%

1.30%

0.02%

19.28%

ADR or GDR

Closed End Fund

Common

ETF

Exchange Traded Vehicle

Mutual Fund

Preferred

Structured Product

Unit (Common + Warrant)

Unknown

Warrant

This figure represents aggregate threshold securities by type. Historical Reg SHO threshold list data are currently provided by four major listing exchanges:

Nasdaq, NYSE, FINRA OTC, and BATS. Nasdaq files are available at https://www.nasdaqtrader.com/trader.aspx?id=regshothreshold&os=io..&ref=app. NYSE

data are avilable at https://www.nyse.com/regulation/threshold-securities. FINRA OTC data are available at https://otce.finra.org/otce/otcThreshold. BATS

data are available at https://www.cboe.com/us/equities/market_statistics/reg_sho_threshold/. Securities type data are from CRSP and Compustat.

64

WORKING PAPER

Figure 4

Reg SHO Threshold List - Total SHO Days by Security Type, 2005-2024

Total SHO Days by Security Type, 2005-2024

0.12%

0.37%

1.05%

13.40%

0.35%

9.48%

0.34%

0.81%

0.15%

43.69%

30.24%

ADR or GDR

Closed End Fund

Common

ETF

Exchange Traded Vehicle

Mutual Fund

Preferred

Structured Product

Unit (Common + Warrant)

Unknown

Warrant

This figure represents aggregate threshold days by security type. Historical Reg SHO threshold list data are currently provided by four major listing

exchanges: Nasdaq, NYSE, FINRA OTC, and BATS. Nasdaq files are available at

https://www.nasdaqtrader.com/trader.aspx?id=regshothreshold&os=io..&ref=app. NYSE data are avilable at https://www.nyse.com/regulation/thresholdsecurities. FINRA OTC data are available at https://otce.finra.org/otce/otcThreshold. BATS data are available at

https://www.cboe.com/us/equities/market_statistics/reg_sho_threshold/. Securities type data are from CRSP and Compustat.

65

WORKING PAPER

Figures 3 & 4 Descriptive Statistics

This table contains descriptive statistics for Figures 3 and 4. Historical Reg SHO threshold list data are currently

provided by four major listing exchanges: Nasdaq, NYSE, FINRA OTC, and BATS. Nasdaq files are available at

https://www.nasdaqtrader.com/trader.aspx?id=regshothreshold&os=io..&ref=app. NYSE data are avilable at

https://www.nyse.com/regulation/threshold-securities. FINRA OTC data are available at

https://otce.finra.org/otce/otcThreshold. BATS data are available at

https://www.cboe.com/us/equities/market_statistics/reg_sho_threshold/. Securities type data are from CRSP

and Compustat.

Security Type

ADR or GDR

Closed End Fund

Common

ETF

Exchange Traded Vehicle

Mutual Fund

Preferred

Structured Product

Unit (Common + Warrant)

Unknown

Warrant

Total

# of SHO Securities % of SHO Securities # of SHO Days % of SHO Days

1,419 8.82%

61872

9.48%

75 0.47%

2194

0.34%

7,151 44.44%

285270

43.69%

3,102 19.28%

197443

30.24%

3 0.02%

1012

0.15%

210 1.30%

5316

0.81%

121 0.75%

2397

0.37%

235 1.46%

6842

1.05%

77 0.48%

813

0.12%

3,526 21.91%

87468

13.40%

173 1.08%

2282

0.35%

16,092

652,909

66

WORKING PAPER

Figure 5

Histogram - Number of Days on SHO Threshold List

Number of Days on SHO Threshold List

1,800

1,600

1,400

1,200

1,000

800

600

400

200

1

8

15

22

29

36

43

50

57

64

71

78

85

92

99

106

113

120

127

134

141

148

155

162

169

176

183

190

197

204

211

218

225

232

239

246

253

260

268

276

283

293

300

308

319

331

339

350

362

380

392

407

419

435

453

470

490

538

580

645

707

793

921

1,173

1,464

-

This figure categorizes threshold securities by total days on the SHO List. Historical Reg SHO threshold list data are currently provided by four major listing

exchanges: Nasdaq, NYSE, FINRA OTC, and BATS. Nasdaq files are available at

https://www.nasdaqtrader.com/trader.aspx?id=regshothreshold&os=io..&ref=app. NYSE data are avilable at https://www.nyse.com/regulation/thresholdsecurities. FINRA OTC data are available at https://otce.finra.org/otce/otcThreshold. BATS data are available at

https://www.cboe.com/us/equities/market_statistics/reg_sho_threshold/. Securities type data are from CRSP and Compustat.

67

WORKING PAPER

Figure 5 Descriptive Statistics

This contains desscriptive statistics for Figure 5. Historical Reg SHO threshold list data are

currently provided by four major listing exchanges: Nasdaq, NYSE, FINRA OTC, and BATS.

Nasdaq files are available at

https://www.nasdaqtrader.com/trader.aspx?id=regshothreshold&os=io..&ref=app. NYSE

data are avilable at https://www.nyse.com/regulation/threshold-securities. FINRA OTC data

are available at https://otce.finra.org/otce/otcThreshold. BATS data are available at

https://www.cboe.com/us/equities/market_statistics/reg_sho_threshold/. Securities type

data are from CRSP and Compustat.

Count of Tickers

Max

Min

Average

StDev

Median

Mode

1,546

1

33.81

113.02

4

1

68

WORKING PAPER

Figure 6

Daily Total FTDs ($ USD), 2007-2024

Daily Total FTD ($USD), 2007-2024

$25,000,000,000.00

$20,000,000,000.00

$15,000,000,000.00

$10,000,000,000.00

$5,000,000,000.00

09apr2007

31jul2007

23nov2007

19mar2008

11jul2008

03nov2008

02mar2009

23jun2009

15oct2009

This text is long and has been trimmed here. Open the source document for the complete record.