Learn · Leverage and risk
Short selling: borrow, collateral and covering
What happens when a sale goes beyond your long position and creates an obligation to return shares.
Last updated: 2026-09-20
Selling shares you first borrow
A short sale reverses the ordinary purchase-then-sale sequence: shares are borrowed, sold and later bought back to return them. In MockTradeCity, selling more shares than your long position first closes that long and then opens a short for the remainder. The ticket asks for confirmation before crossing that boundary. Each account has one net position per symbol, so the system does not keep a separate long and short in the same stock.
For example, selling 150 shares while holding 100 long closes those 100 and can open a 50-share short if all requirements are met. A later purchase covers the short first before opening a new long. A lower repurchase price reduces the cost of returning shares; a higher one increases it. Borrow fees also affect the account result. Everything is denominated in fictional City Coin, with no real-money borrowing or repayment.
A borrow must be available
The engine checks the company's lending pool before a short can open. Shares come from eligible city participants and enrolled player lenders, under finite pool and account limits. A displayed pool quantity is the market's aggregate availability, not a personal allocation reserved for you. Your own collateral and concentration limits can impose a lower maximum. If the request cannot satisfy the required borrow and risk checks, the engine rejects it rather than inventing shares.
The company borrow panel shows available quantity, current utilization and a reference annual fee rate. English labels include ETB and HTB for easier or tighter borrowing conditions. These summarize the pool's state; they are not execution guarantees. The fee increases with scarcity under the city's rate formula and is settled daily. A reference rate observed now can differ from a later settlement's applicable charge as the pool state and your actual borrowing change.
Collateral and proceeds remain committed
The city's short-opening rule requires initial collateral equal to 150 percent of the short sale amount from Available CC. Sale proceeds also enter the collateral account and cannot be freely spent as ordinary cash. For an illustrative 1,000 CC short sale, the opening collateral requirement is 1,500 CC, with the 1,000 CC proceeds committed alongside it. The shares owed remain a liability, so the larger collateral balance is not a windfall.
While the position is open, the engine revalues the cost of returning the borrowed shares. The short-only maintenance calculation compares account resources after short liabilities with a requirement currently equal to 125 percent of those liabilities. Multiple shorts share the account-level assessment rather than each being isolated in a separate account. A mixed account using margin financing also has long-side maintenance requirements, so the displayed account risk figures are more complete than one position's sale proceeds.
Covering and forced repurchases
Covering buys shares back, returns the borrowed quantity and releases the corresponding collateral under settlement rules. Short-opening Limit orders and covering orders use Immediate-or-cancel (IOC), so an unfinished portion does not remain as an ordinary resting order. Available liquidity and price protection can limit the quantity completed in one attempt. A cover that fills only partly leaves the remaining short obligation in place rather than treating submission as full repayment.
If account equity falls below the applicable Maintenance line, the engine can start automatic covering without another reminder. It processes the required liquidation through the market's normal protections and can need further attempts when liquidity is insufficient. Lender recalls, delisting and other defined company events can also require covering or settlement. Rising prices can keep increasing a short liability; the collateral initially posted is not a ceiling on the possible loss of fictional CC.
Where to inspect shorts in the city
The company borrow badge opens the pool figures and current reference rate. The trading ticket explains when a requested sale would extend beyond owned shares, including its direction and required execution behavior. Those checks describe whether a new short can open. They do not replace Account's view of an existing obligation, where changing prices, borrow fees and other positions contribute to the account's current resources and maintenance requirement.
Account separates collateral, short liabilities, maintenance requirements and the remaining distance to liquidation. Positions shows the quantity still short, while activity records identify borrowing, charges and covering events. Comparing those records with the order's filled quantity explains a partial cover or a released reservation. Market rules and the live account parameters remain the reference for current rates. The mechanism is part of MockTradeCity's fictional economy and supplies no claim about a real brokerage's short-sale terms.