A security lands on the threshold list when fails exceed both an absolute share count and a percentage of shares outstanding for five consecutive settlement days. Exchanges publish the lists daily.
Once flagged, close-out obligations tighten: a broker with a fail aged beyond the permitted window must buy in, and may be barred from further short sales in that security without a pre-borrow.
Example: a small cap with 20 million shares outstanding shows fails of 14,000 shares — above 10,000 and above 0.5% of outstanding — for five straight days. It joins the list, brokers with aged fails must close out, and traders find shorting it suddenly requires a pre-borrow rather than a simple locate-requirement.
Related: fail-to-deliver, regulation-sho, naked-short-selling, buy-in