I have checked my IB account and my UCO had been bought in yesterday with little bit lower than UCO closing price. There is no shortable UCO in IB at this moment, I can understand this situation.
I believe that rule is for accounts less than 25K. If you have a larger account, that rule does not apply and once you covered, the cash is tradable. There is no difference between going long or short.
That's true to a point. Correct me if I'm wrong, but if you are using any margin with IB and most other brokers you agreed when you signed up for their service that they can loan out your shares without them informing or compensating you (although IB does have a program where they split the fees if you opt in, presumably making yours the very last shares they lend). At the retail broker level I would think that the vast majority of the shares are effectively being lent by the broker with the broker taking all the lending fees and the customer oblivious to it all? In this case if the customer sold their stock the broker would have to scramble to find a replacement, but otherwise they don't have any control of the process at all. IMO this whole thing is one of the biggest scams left in the brokerage world, it's essentially free money to the brokers. I don't know why no-one has offered to compete here and compensate the lenders while charging a fair commission for the service. IB did have this but eliminated it a couple years ago. Bob, business opportunity?
I really doubt this, or else everyone would be getting a lot more PIL instead of qualified dividends. I have quite a few long term equity holdings that pay quarterly dividends and it is very rare to get a PIL instead of a qualified dividends. I think your broker can't loan out any of your fully-paid-for shares unless you specifically opt in.
A good point about PIL, but.....directly from the IB rep here on ET regarding the matter "A margin account alone does not afford the broker the right to lend out your securities, it's the actions you take in that account. If, for example, you maintain a margin account with fully paid securities (i.e., do not have a margin loan), then, absent a program like the Yield Enhancement being discussed here, the broker has no right to lend out your securities and must segregate them in what is referred to as a good control location (special bank or DTC account). If the broker has financed the purchase of your securities via a margin loan, then the broker has the right to hypothecate (loan or pledge) securities but only in an amount up to 140% of your debit or margin loan balance." (https://www.elitetrader.com/et/threads/ib-yield-enhancement-program-question.301819/page-2) Of course IB reps are known to frequently give misleading or even downright false information, witness the thread above. However I did read their agreement you sign when setting up an account and it does give them the right to loan stock from your account up to 140% of your margin loan balance without informing you, asking your permission, or compensating you. Late thought, it's highly probable that dividend paying stocks aren't shorted nearly as much as non dividend paying stocks, hence explaining the lack of PIL you observed.
@Sig, I see your point. Most people don't even know how shorting and lending works, so maybe they are shortchanged this way. But the way I see it, short-selling is making markets more efficient... and without lending this isn't possible. So if my broker gets a (usually) small fee for facilitating this, I'm okay with that. They probably incur the cost of administration. If the short rates were higher, then I think it would be more fair to distribute the spoils.
For efficient markets sake you would distribute the spoils. The shares with a 30% borrow rate are the ones that most need more people willing to lend. If they captured that 30% minus a fair transaction cost they'd be incentivized to lend, heck you could incentivize me to buy shares just to lend in some cases. It's a market inefficiency if nothing else.
No shorting and no lending no put options. No put options and no real options market. Most institutional investors do in fact get a portion of stock rebate - but they do pay higher commissions. Net net if they don't trade frequently their net commissions for any period can be negative. Same for size retail accounts.
I know it wasn't your point but you did bring up a good point that if a stock with a high borrow rate has options you can capture the borrow rate by taking advantage of the resultant break in put call parity even as a retail investor.