How do brokers charge for locates?

External question — Quantitative Finance Stack Exchange Author: windfinder Original post: https://quant.stackexchange.com/questions/3427 License: CC BY-SA 3.0 — https://creativecommons.org/licenses/by-sa/3.0/ Adaptation: HTML converted to plain text; contact email addresses removed. Few quick questions on how locates work. How do brokerages charge for locates? They charge based on volume? How long you need the locate (I assume an one day is max)? Do the brokerages actually hold the underlier 1:1 with the potential short? AKA: If I want the ability to short IBM 1 million shares, does the brokerage actually hold 1 million in order to cover? Or do they just hold a certain ratio of the total? How do brokerages hedge themselves against underlier price movement? Do they buy options? I assume that would factor in to the cost of the locate.