What it is
When a seller of US-listed stock does not deliver shares by settlement, the shortfall is recorded as a fail to deliver. The SEC releases fails by security twice a month with a lag of about two weeks.
Reg SHO threshold
Under Regulation SHO, a security with aggregate fails of at least 10,000 shares and 0.5% of shares outstanding for five consecutive settlement days goes on the exchange's daily threshold list. After 13 consecutive settlement days on the list, brokers must close out the remaining fails.
What to keep in mind
Fails can come from naked short selling but also from operational delays or borrow problems, so the numbers alone do not prove abusive shorting. Persistent fails in small caps often come with high volatility.
This explanation is general information, not investment advice. Rules reflect September 2026 and may change; check official exchange and broker notices.