What do I need to know about Reg SHO?

What is Regulation SHO Rule 204 (Reg Sho 204) and what is its purpose?

Regulation SHO Rule 204, is a rule implemented by the Securities and Exchange Commission (SEC) with the primary purpose of building industry-wide standards for short selling, promoting market integrity, and imposing certain obligations and restrictions on market participants engaged in short selling activities.

When you intend to sell a stock long or short, our Clearing Firm, Apex Clearing, is required to deliver that security. If the broker or Clearing Firm is unable to fulfill its the delivery obligation, they may initiate a “Buy-In” process. This means they will purchase or borrow the necessary securities in the market to cover the failed delivery.

You may find further detailed information on the US Securities and Exchange Commission website at https://www.sec.gov/investor/pubs/regsho.htm

Does Reg SHO 204 apply to all market participants?

Yes, Reg SHO 204 applies to all market participants engaged in short selling activities, including broker-dealers, institutional investors, and individuals.

Is Reg SHO 204 applicable to both equity and options markets?

Yes, Reg Sho 204 is applicable to both equity and options markets as it pertains to selling activities in these markets.

How does Reg SHO affect you?

You may receive notice that a position you sold - typically sold short - may be at risk of failing to deliver. Should this happen, you would need to close out, or “buy in” your short position or our Clearing Firm may close the position on your behalf the following business day at market open.