Yes, you are missing something. The debit rate you pay at a prop firm is the same debit rate you pay anywhere. There is no difference. It's not the rate you pay for borrowing leverage capital, it's the rate you pay your broker for simply holding a debit balance. A capital charge relates to leveraged capital. If you came to my office to trade and you came in with 25k. And I gave you a haircut, you will pay that same debit rate on any debit balances in your account. You will also receive a credit rate on any credit balances. In other words, if all you did was short stock, you would never pay a debit, you would be receiving interest money every day you held the position. Now, let's say I extended your haircut to 50k, 25k more then you have in capital. Then, for this extra haircut, you will be charged a capital charge for that extra 25k. That capital charge is not the debit rate! It will certainly be higher, in some cases 9% to 10%. That is the difference.
Don't forget that most retail brokers don't pay on short stock either (which makes pair trading impossible)....and that retail restricts the amount of capital you can use...a whole different world of opportunities to take advantage of. (Good explanations Maverick!). Don