You're saying a broker may charge 40% for what they are paying 1/2 cent to borrow? Maybe if they were offerred this time of money they would oblige willingly, but I was hoping they would have to oblige if stock is located, regardless of were, and can only charge reasonable fees.
Although my case does not fit the description you say, however, the idea of having a SHO violation indicates to me that it's yes possible to end up short a stock which the broker doesn't have---else there would be a forced buy-in within 4 business days.
They charge 1/2 cent, not 1/2 percent. Question is moot, see their website: "By offering guaranteed stock locates on a first-come, first-serve basis, LOCATESTOCK allows small and mid-sized hedge funds, broker dealers and day traders to compete for borrows with the largest hedge funds"
Your broker can pretty much do anything he wants regardless of what you think is reasonable or makes sense. You pretty much sign sensibility away when you open your account.
40% ? LOL. Last summer I had a Citibank preferred stock conversion that resulted in my being short 10,000+ shares with an indicative (borrow) rate of over 100%. That was over a $100 a day ($300 for a weekend). I got out of Dodge pretty quick.
you are dreaming if u think that goldman clients don't have an edge when it comes to borrowing stock.