Final answer:
A threshold security is a security that meets certain criteria set by a stock exchange, including the existence of an aggregate fail to deliver position. This is done to regulate trading and mitigate risks.
Step-by-step explanation:
A threshold security is a term used in finance and investment to refer to a security that meets certain criteria set by a stock exchange in order to be included on the threshold securities list. One of these criteria is the existence of an aggregate fail to deliver position.
An aggregate fail to deliver position occurs when there are outstanding short positions in a security that have not been delivered by the settlement date. This can happen when there is a high level of short selling activity and a shortage of available shares to borrow for delivery.
By including a security on the threshold securities list, stock exchanges aim to increase transparency and mitigate the potential risks associated with excessive short selling and fails to deliver. It serves as a mechanism to monitor and regulate the trading of these securities.