If a broker executes a short sale, and then fails to deliver shares to the purchaser, further restrictions on short selling may come into force. If the "fail to deliver" position is 10,000 shares or more, for five consecutive trading days, and the position amounts to at least 0.5% of total shares outstanding, the stock becomes a threshold security. The exchanges and Nasdaq are now required to publish daily lists of threshold securities. Regulation SHO specifies that if a fail to deliver position in a threshold security persists for 13 trading days, the broker (or the broker's clearing house) must close the short position by purchasing securities of like kind and quantity. After the 13 days have elapsed, the broker may not accept any more short sale orders until the fail to deliver position is closed by purchasing securities.
The rules include exemptions for market makers engaged in bona fide market-making activities, and for certain transactions between brokers.