Do intraday shorts pay interest?

Discussion in 'Order Execution' started by ScroogeMcDuck, May 22, 2020.

  1. If you short something at the beginning of the day and buy it back before the end of day, do you avoid having to pay interest on borrowed shares? The settlements get netted out by DTCC.
  2. Also, if the above is true, what's the point of requiring a locate for shares that will never be borrowed?
  3. OTOH why would anyone commit to lend shares if they're probably not getting paid for it?
  4. S2007S


    There are some brokers now that do pay you if you hold the stock to be paid interest if your shares are borrowed from the broker.
  5. guru


    All this depends on the broker. Most brokers don't charge intraday interest, but some may. Some brokers don't charge locate fees, while others do.

    Locating and shorting shares isn't related to %interest. But even if it was, then again, some brokers may charge locate fees and/or intraday interest, and others may charge one or the other, or none.
    MoreLeverage likes this.
  6. zdreg


    The OP thought that the shorts pay interest which is incorrect. Read his post. Every short sale requires a locate.
    Your answer muddles the reality.
    On easy to borrow no one pays interest, directly or indirectly.
    Above applies to your reply also. It doesn't answer hisquestion.
  7. does interactive brokers charge locate fees or intraday interest?
  8. guru


    I don't think so, as they don't have a process of "reserving" or "locating" shares that I know of. And they usually use their own internal pool of available shares from other customers, but not sure if they can get the same stocks that you can get elsewhere.
    Some brokers use external services that pool shares between other multiple brokers, and that's where you'd pay locate fee to the 3rd party, plus the broker may charge an additional fee as well.
    So basically you may get different HTB stocks at different brokers, and possibly more than at IB. Other times IB may have more shares available for shorting. I usually get short shares at IB for most stocks (sometimes partial fills), though sometimes have to wait a few minutes or hours before my orders on HTBs get filled, and sometimes at better price than I originally placed my limit if the stock went up in the meantime. It can get random, where no one really may know what's available, when, where, and for how much.
    Last edited: May 22, 2020
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  9. narafa


    Because the broker doesn't know if you are holding the short position overnight or simply closing it out on the same day.

    Moreover, the trade must be settled, whether it was closed out on the same day or not. If brokers don't locate the shares in case of intraday shorting and covering, then this essentially becomes naked shorting, which is banned.
  10. qaz


    The broker has till T+2 to locate shares if the trader holds the short overnight. For an intraday short and cover, they do not need to.

    I spoke to @def about having an opt-in where the trader authorizes the broker to close all short positions at the end of the regular trading hours. This move is technically within the rules and doesn't need shares to be located before shorting. I'm unsure if IB is considering such a move. If they do, other brokers might follow suit.
    #10     May 22, 2020
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