term used when one broker lends securities to another broker to cover customer's short position and imposes a charge for the loan. Such charges, which are passed on to the customer, are the exception rather than the rule, since securities are normally loaned flat between brokers, that is, without interest. Lending at a premium might occur when the securities needed are in very heavy demand and are therefore difficult to borrow. The premium is in addition to any payments the customer might have to make to the lending broker to mark to the market or to cover dividends or interest payable on the borrowed securities.

minimum amount that a client must deposit in the form of cash or eligible securities in a margin account as spelled out in Regulation T of the Federal Reserve Board. Reg T requires a minimum of $2,000 or 50% of the purchase price of eligible securities bought on margin or 50% of the proceeds of short sales. Also called initial margin.

paying interest to a customer on the credit balance created from the proceeds of a short sale. Such proceeds are held in escrow to secure the loan of securities, usually made by another broker, to cover the customer's short position. Lending at a rate is the exception rather than the rule.

loaned without interest, said of the arrangement whereby brokers lend securities to one another to cover customer short sale positions.

Securities and Exchange Commission rule requiring that short sales be made only in a rising market; also called plus tick rule. A short sale can be transacted only under these conditions: (1) if the last sale was at a higher price than the sale preceding it (called an uptick or plus tick); (2) if the last sale price is unchanged but higher than the last preceding different sale (called a zero-plus tick). The so-called "tick test" is referenced to either the last transaction price reported pursuant to an effective transaction reporting plan or on a particular exchange. Both the New York and American stock exchanges have elected to use the prices of trades on their own floors for the tick test. Since the advent of decimal trading in mid-2000, the Securities and Exchange Commission has been reviewing its short-sale rule. Decimal pricing may result in exchanges setting the minimum price variation-the smallest amount by which the price of a security can change-which today is ($.0625 = 1/16) for most equity securities, at one cent or potentially even lower. The short sale rule was designed to prevent abuses perpetuated by so-called pool operators, who would drive down the price of a stock by heavy short selling, then pick up the shares for a large profit. Regulation SHO, effective January 3, 2005, updated several key provisions of the shortsale rule. It established a one-year pilot program temporarily suspending the tick test in a list of designated companies starting May 2, 2005, with the purpose of determining if the short sale regulation should be permanently removed.