Short Sell IB costs

Discussion in 'Retail Brokers' started by jzamoras, Feb 22, 2008.

  1. jzamoras


    Hi all,

    What are the costs of short sell ETFs on IB?. I asked to help desk and they told me they are the same of buying long. It does not make sense to me. Am I missing something?

    Best Regards,
  2. cgar


    When you short an ETF you do not have to borrow the shares,hench, your costs will be the same either buying or selling.
  3. jzamoras


    Thanks for your prompt answer! Can you elaborate? I still don't understand it.

  4. Commission costs for shorting are the same as for other trades, but sometimes, on some dates, for some stocks, you must pay an extra interest charge for the privilege of borrowing the shares on that particular date. This is done in cases where IB must pay extra in order to borrow the shares for your use. A broker who lends out a customer's shares, or its own shares, so that they can be shorted by the borrower of shares, is entitled to charge the borrower interest on the borrowed shares.
  5. There are three costs to selling short.
    The commission to execute the trade.
    The 'rebate rate' on the credit balance from the sale proceeds.
    The borrow fee for the hard-to-borrow names that in some situations drive the above 'rebate rate' to zero AND into negative territory. In effect you must pay a locate fee. In some cases I have seen the fee exceed 65% annually.

    That is 6500 basis points annualized in costs.
  6. zdreg


    in order to avoid confusion, it would be helpful if you explained why in most cases there is no charge and in many cases at least for professional traders they receive credit interest from a short sale rather than pay any interest.