Does inclusion of a stock on the threshold list mean that improper trading is occurring in the stock?
The appearance of a security on a threshold list does not necessarily mean that there has been abusive naked short selling or any impermissible trading in the stock. Delivery failures can be caused by both long and short sales. In addition, notwithstanding actions by broker-dealers to close-out delivery failures, certain securities may remain on an SRO’s threshold securities list for an extended period for a variety of legitimate reasons, such as: • Despite proper action to close-out fails, new delivery failures from long or short sales, at the same or other broker-dealers, result in the security staying on the threshold list; • One or more broker-dealers may have temporary but legitimate problems in obtaining the stock they borrowed in time for delivery; • Long sellers may have difficulty in producing stock in good deliverable form to their broker-dealer; • The delivery failures were established prior to a security’s appearance on the SRO’s threshold securities list, and thus are “gra
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