SERIES 7 | SERIES 65 | FINANCIAL REGULATION COURSES
FINRA Rule 4560 — Short-Interest Reporting — requires every FINRA member firm to record and report to FINRA on a bimonthly basis the total gross short positions existing in all customer and proprietary firm accounts in all equity securities — with reports due by 6:00 PM Eastern Time on the second business day after each designated reporting settlement date — creating the industry-wide short interest data infrastructure that FINRA publishes for market participants, regulators, and investors as a primary indicator of short selling activity, market sentiment, and potential settlement risk across equity securities.
Short interest — the aggregate of all open short positions in a security across all accounts at all reporting firms — is one of the most widely followed indicators in equity market analysis, used by investors to assess the degree of bearish sentiment in a specific security, to identify potentially short-squeezable situations where large short positions may be forced to cover simultaneously, and to evaluate the relationship between short interest and subsequent price performance. Rule 4560 is the regulatory foundation of the short interest data publication that makes this analysis possible — without the mandatory reporting it requires, the short interest data that market participants rely on would not exist.
The rule has been under active regulatory review — FINRA filed proposed amendments to Rule 4560 with the SEC on May 18, 2026 that would require firms to report short positions as of the last settlement date before a security's symbol is deleted, addressing a gap in coverage when securities cease trading — and has been the subject of broader discussions about potentially increasing reporting frequency and expanding the scope of reportable positions to include synthetic short exposure through derivatives.
The Bimonthly Reporting Requirement
Rule 4560(a) establishes the bimonthly reporting cycle — requiring member firms to report their short positions twice per calendar month at designated settlement dates specified by FINRA on a published schedule.
The two reporting settlement dates each month are the settlement date of the fifteenth of the month — or the preceding settlement date if the fifteenth falls on a non-settlement day — and the last business day of the month on which transactions settle. These two monthly reporting dates capture short interest data at the mid-month and end-of-month points — providing a bimonthly snapshot of aggregate short positions across the equity markets that is more informative than a single monthly observation while remaining practically manageable for reporting firms.
Reports must be received by FINRA no later than the second business day after the reporting settlement date designated by FINRA — by 6:00 PM Eastern Time on that second business day. This two-business-day reporting window gives firms sufficient time to compile their account-level short position data and submit it through FINRA's short interest reporting system accessible through FINRA Gateway — the web-based filing system that is the only accepted method for submitting short interest reports.
The data submitted through FINRA Gateway is then processed by FINRA and published — for OTC equity securities the data is disseminated on the FINRA website approximately seven business days after the designated settlement date, which is five business days after the reports are due from member firms. This seven-business-day publication lag reflects the time required to collect, validate, aggregate, and publish the data across all reporting firms — a lag that has been discussed in regulatory commentary as potentially reducing the timeliness and informativeness of the published data.
What Must Be Reported — Gross Short Positions
Rule 4560(b) establishes the scope and nature of the positions that must be reported — specifying that member firms must record and report all gross short positions existing in each individual firm or customer account that resulted from either a short sale as defined by SEC Regulation SHO Rule 200(a) or a transaction marked long that caused a short position consistent with Regulation SHO.
The gross reporting requirement — established by 2012 amendments that codified prior practice — means that short positions must be reported on an account-by-account basis rather than netted across accounts. A firm that has one customer account with a short position of ten thousand shares and another customer account with a long position of ten thousand shares in the same security must report the ten-thousand-share short position — not a net position of zero. The gross reporting requirement ensures that the published short interest data captures the true extent of short positions in a security rather than being obscured by offsetting long positions in other accounts at the same firm.
The rule requires reporting of short positions resulting from short sales that have settled or reached settlement date by the close of the reporting settlement date — positions from transactions that have not yet settled are not reportable under Rule 4560. This settled-position requirement ensures that the reported data reflects actual short exposures rather than including positions from transactions that may be cancelled or fail before settlement.
Securities Subject to the Rule
Rule 4560 applies to all equity securities regardless of where the trading occurs or where the security is listed — including securities listed on national securities exchanges such as the New York Stock Exchange and Nasdaq, OTC equity securities traded in the over-the-counter markets, and securities of issuers whose shares may be traded in both domestic and foreign markets.
The comprehensive coverage of all equity securities — not merely exchange-listed securities or securities meeting a minimum trading activity threshold — ensures that the short interest data published by FINRA provides a complete picture of short selling activity across the equity markets. For OTC equity securities — including those traded on the OTC Bulletin Board and in the Pink Sheets markets — FINRA Rule 4560's reporting requirement fills the gap that might otherwise exist given the reduced regulatory oversight applicable to non-exchange-listed securities.
Rule 4560 also applies to short positions resulting from exchange-traded fund creation activity — where the ETF creation mechanism can generate short positions in the component securities as part of the arbitrage process that maintains ETF price alignment with net asset value. The inclusion of ETF creation-related short positions ensures that Rule 4560's data captures all economically meaningful short exposures rather than excluding positions that arise through the mechanics of the ETF market structure.
Exceptions to the Reporting Requirement
Rule 4560(c) specifies limited categories of positions that are excluded from the reporting requirement — recognising that certain transactions that may appear on a firm's books as short positions do not represent the economic short exposure that the reporting requirement is designed to capture.
The first exception is for any sale by any person for an account in which they have an interest if that person owns the security sold and intends to deliver it as soon as possible without undue inconvenience or expense. This exception addresses delayed delivery situations where a seller who owns the security but has not yet arranged delivery may appear to be short — but the economic reality is a long position awaiting delivery rather than a genuine short sale.
The second exception is for positions resulting from failure to receive securities that a firm was entitled to receive — where the apparent short position arises from a counterparty's failure to deliver rather than from a genuine short sale by the reporting firm.
These limited exceptions preserve the integrity of the reporting requirement by excluding positions that do not represent the genuine short selling activity the rule is designed to capture — while ensuring that all bona fide short positions are included in the reported data regardless of the technical account classification through which they appear on the firm's books.
The Proposed 2026 Amendments — Addressing the Symbol Deletion Gap
On May 18, 2026 FINRA filed proposed amendments to Rule 4560 with the SEC that would add Supplementary Material .01 addressing a specific data gap identified in the current reporting framework.
Under the current rule if a security no longer has a valid trading symbol as of a designated short interest reporting settlement date — because the security has been delisted, the company has been acquired, or for any other reason the symbol has been deleted by the relevant self-regulatory organisation — member firms do not include that security in their short interest reports. This creates a gap in the data record at the critical moment when a security ceases active trading — precisely the period when short interest information may be most relevant to understanding the settlement dynamics of the market for that security.
The proposed amendment would require member firms to report their gross short positions in a security as of the last settlement date for which the symbol was in effect — ensuring that FINRA receives a final short interest report capturing the state of short positions at the time the security ceased trading. This final report would provide FINRA and market participants with a complete record of short exposure at the time of delisting or trading cessation — enabling more accurate assessment of potential settlement obligations and fail-to-deliver risks associated with the cessation of trading in that security.
Broader Context — The Short Interest Data Debate
FINRA Rule 4560's bimonthly reporting framework has been the subject of ongoing regulatory debate about whether the current data collection frequency, scope, and publication timeline are adequate to serve the market transparency and regulatory oversight purposes that short interest reporting is designed to achieve.
FINRA's June 2021 Regulatory Notice 21-19 — issued in the aftermath of the meme stock short squeeze events involving GameStop and other heavily shorted securities — solicited comment on potential enhancements to the short interest reporting framework including increasing reporting frequency to weekly or even daily, expanding the scope of reportable positions to include synthetic short exposure through derivatives and securities lending, and reducing the publication lag between data collection and dissemination.
The notice reflected FINRA's view that the current bimonthly reporting cycle — with a seven-business-day publication lag — may not provide market participants and regulators with sufficiently timely information to assess rapidly developing short interest dynamics in individual securities. The meme stock events demonstrated that short interest conditions can change dramatically within days — a timeframe in which the bimonthly reporting cycle provides no updated information to market participants.
The broader discussion about short interest reporting transparency connects Rule 4560 to the Short Selling entry of this dictionary — the regulatory framework governing short selling itself — and to FINRA Rule 4320's short sale delivery requirements — together these rules form the regulatory infrastructure for monitoring, managing, and disclosing short selling activity in the United States equity markets.
Examination Relevance and Key Takeaways
FINRA Rule 4560 is tested on the Series 7 examination in the context of short interest reporting requirements, the bimonthly reporting cycle, and the scope of positions subject to the rule.
The key points to retain are these.
FINRA Rule 4560 — Short-Interest Reporting — requires every member firm to report total gross short positions in all customer and proprietary accounts in all equity securities to FINRA on a bimonthly basis. Reports must be received by FINRA by 6:00 PM Eastern Time on the second business day after each designated reporting settlement date. The two reporting settlement dates each month are the settlement date of the fifteenth — or the preceding settlement date if the fifteenth is a non-settlement day — and the last business day of the month on which transactions settle.
Firms must report gross short positions on an account-by-account basis — not netted across accounts — for all short positions resulting from short sales that have settled or reached settlement date by the close of the reporting settlement date. The rule applies to all equity securities regardless of listing venue — including exchange-listed securities, OTC equity securities, and positions resulting from ETF creation activity. Limited exceptions exclude positions from delayed delivery situations and failures to receive securities. FINRA publishes the aggregated short interest data approximately seven business days after the designated settlement date — five business days after reports are due from member firms. Proposed May 2026 amendments would add a requirement for member firms to report final short interest data as of the last settlement date before a security's symbol is deleted — addressing a data gap when securities cease trading.
