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IB Short Stock Buy-In Procedures

SEC regulations implemented in September 2008 require that short sellers comply with their delivery obligations on the standard settlement date, generally three business days after the trade date. The regulations additionally require a repurchase of securities that are not delivered ("fail") by the next trading session for the securities. This contrasts with previous practice wherein a trade could "fail" for several days after the target settlement date, permitting brokers more time to make delivery by finding lenders for the stock(s).

As a result of the more stringent regulatory enforcement of the delivery rules, lenders have generally become more conservative in their lending activities leading to a decline in the general availability of inventory in many less widely held stocks. This creates an additional effect on the securities borrow/loan market by causing dealers to more readily recall existing loans rather than establishing new borrows to manage their inventory needs. For a fuller discussion of short sale and stock borrow and lend ("SLB") mechanics, please click here.

For details on how IB processes buy-ins please refer to the following IB Knowledge Base article http://ibkb.interactivebrokers.com/node/845.