If they did not disclose it would be in violation of SEC rules. If it they did not disclose they would be subject to lawsuits and/or arbitration.
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I was charged a ridiculous overnight short fee
- Thread starter GotherL
- Start date
Read the thread. It was disclosed. https://www.elitetrader.com/et/thre...vernight-short-fee.338382/page-3#post-4973332
Understood.
So it looks like it was $385, but still too much, so they may be charging $x for short locate, and $y for short/borrow interest rate, but neither of these are known right now. So ask them for specific numbers.
IB shows short borrow rate as 700%, so 700%/365 *7 = 13.4%. The stock dropped by more than 50% overnight, so there is still room to make money. Even at 3 days (over a weekend) it would come to 700%/365 *9 = 17.25%.
But we don't know whether different brokers may be able to use different borrow rates. And again the locate fee.
And I don't think that 3-day settlement applies here (as someone else pointed as possibility) because you closed the position next day at the price of the next day, so you no longer had a position. If short borrow rate applied to the 3-day settlement then you'd still have a position and they would need to close your position 3 days later at the unknown price of the stock 3-days later. This wouldn't make any sense.
Also, short borrow rate may be unknown during the next 3 days, and you cannot be charged for something unknown against your will.
Just ask TradeZero for specifics as a starting point. Though I remember looking at their website months ago and noticing the short borrow rate being unacceptable.
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The source of this chart is?
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TradeZero_Mohamed
Sponsor
The 7x hard to borrow overnight fee applies to short positions held overnight. For example, if you located 1,000 shares of XYZ at $0.02, you would pay $20 for intra day use and if you decided to hold the short position overnight, you would pay an additional $140 (7x the intra day price).
Holding the short position overnight is not free to a Broker Dealer and is not included in the price of an intra day locate. The 7x is an estimated price because the DTC determines the price of the borrow after the close of regular trading hours. Intra day, there is no way for us to provide the actual overnight price of the borrow. Very frequently the actual price of the overnight fee exceeds the 7x price and we pay the balance. While the 7x fee is only an estimate, we are up front about the fee so our clients can calculate the cost of the position and decide whether or not to carry the position.
So it seems that you don't charge 7x the overnight borrow %rate, but 7x the locate fee (for the first night), correct? What about following nights, are they charged at 1x the initial locate fee, or at 1x the overnight borrow interest rate that may be similar across brokers?
How is the locate fee determined and is it consistent across brokers, or specific to TradeZero or your customers that offer/lend their shares for borrowing?
TradeZero_Mohamed
Sponsor
We charge 7x the locate fee for the first night and 1x the locate fee every night thereafter that the short position is held overnight.
The locate fee is based on the price it costs us to locate a share of the specific stock from our clearing house or other locate vendor.
Thanks for the answer. Could you as an example post here what the locate fee was for ASLN overnight from yesterday till today (which is then multiplied by 7)?
There seems to be some confusion as to whether we are comparing apples to apples. Posting this will clear out the confusion, because we know more or less where the market short borrow rate currently is on ASLN.
What I want to determine is whether Tradezero is charging 7 times the market rate or 7 times something else which then on average end up being more or less similar to the market rate.