How does short locate work

In these volatile markets, it’s prudent for traders to have the capacity to play both directions of a stock’s price move – up and down. This means being able to trade stocks long and short. Long trades involve buying stock to sell at a higher price for a profit. Short trades involve selling a stock you don’t own with the intention to buy back at a lower price. In order to short sell a stock, you need to be able to borrow shares to sell. Generally, this process happens behind the scenes and the process is facilitated by your broker. Your broker borrows shares of a stock and lends them to you so you can place a short trade. These borrowed shares will be returned at a later point when the short position is closed (known as “covering”). Since you are technically borrowing shares, you will need to have a margin trading account.

Short Locates (HTB/ETB)
Every morning custodial brokers assess the inventory of stocks with shares available for borrow. The most widely traded stocks in the S&P 500 usually have shorts available to borrow and are placed on an internal “Easy to Borrow” list. Short selling any of these stocks is fluid and frictionless for the end-user.
Moving down the tiers of liquidity, the availability of short shares may become smaller both in terms of short-ability and the number of shares available for borrow. If you encounter a stock that shows no availability of short shares, then you could request a “Short Locate” with your broker.

How Does the “Locate” Process Work?
Depending on your brokerage trading platform, you may be able to request a Short Locate directly through the platform. Direct access trading platforms tend to have embedded Short Locate capabilities for this process. Otherwise, you may need to contact a trading specialist through customer service and request the stock and shares over the phone or through messenger or chat support, if available.

Locate fee
If your broker is successful in locating borrowable shares, they will notify you of the available shares and the associated locate fee, which can vary based on supply and demand. You will be given the option to accept or cancel. If you accept the shares, then the locate fee gets applied to your account making the short shares available for the day. Keep in mind, the locate fees apply whether you end up using the located shares (i.e. short selling) or not. Accepting the shares doesn’t equate to shorting the shares. (source: CenterPoint securities)