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Selling a security you do not own. Short selling is a speculative trading strategy normally done in anticipation of falling prices. When selling the security at a certain price and then buying it back (Buy to Cover) the profit or loss would be the difference between the initial selling price and the subsequent purchase price. It is illegal for a seller not to declare a short sale at the time an order is placed.

Special Cautions
No interest is credited on cash balances in short (G & H) accounts.
Short positions are "marked to market" daily by transfers of cash between your margin and short accounts.
Short sellers should be aware of the specialized risk of a buy-in of their position at any time.
Short sellers are responsible for dividend charge-backs and any other distributions while they are short.

Restrictions such as "All or None" are not allowed on short sell orders.
Market orders placed on the Toronto Stock Exchange/TSX Venture Exchange before the market opens are prohibited.
Canadian orders must be in even board lots.
U.S. orders allow odd board lots and mixed board lots.
A security cannot be shorted in the short account if the margin account is long the same security.
U.S. securities - If TD Direct Investing cannot borrow the security for you to sell at the time the order is placed, the order will be rejected.

The following securities cannot be shorted:

Securities trading under $ 1.00
NASDAQ Bulletin Board and Pink sheet Securities.
Any Canadian over-the-counter securities.
Securities which have had their margin eligibility removed by TD Direct Investing.

Trading 'Tick' Rules
The tick is the direction in which the price of a stock moved on its last sale. An up-tick means the last trade was at a higher price than the one before it, and a down-tick means the last trade was lower than the one before it. A zero-tick, or even tick, means the transaction was at the same price as the one before it.

Exchanges impose restrictions when a stock can be sold short. Known as the tick rule, the tick rule for the exchanges are:

Toronto Stock Exchange
even or uptick
TSX Venture Exchange
even or uptick

Buy-In of the Short Position
You can be forced to buy the shares you are short (a Buy-In) on two occasions:

When TD Direct Investing is recalled on the equity they borrowed to protect your position.
When TD Direct Investing is unable to borrow shares to protect the position.

A Buy-In can happen without prior notice to you. Also, even if you repurchase the short position, you are still liable to a Buy-In until the settlement date.

When a short position is first created (i.e. security sold short), the short account will have a cash balance from the proceeds of the sale and the market value of the short position will appear as a negative. The cash balance equals the negative market value of the short position.

When the price falls or rises, the market value changes accordingly, but the cash balance still reflects the original proceeds. Therefore, on a daily basis, a "mark-to-market" is calculated to balance out these gains or losses and equalize the cash balance with the market value of the position. TD Direct Investing automatically moves funds between the margin account and the short account as required. There is always a one-day delay between the calculation and the moving of funds.

For more information on order entry please see - Stock Order Entry.

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