I was charged a ridiculous overnight short fee

[NewTraderAdventure]

huh

are you guys making any sense

the borrow is an annual rate

the guy shorted $1000 worth of stock

how does this come to over 500 in fees overnight

lol

7X the locate fee ? And no disclosure of that fee ( the $$$$$$) in advance ? They should be arrested for grand larceny

IB doesnt charge ANY locate fee as far as I know for stocks shortable on the platform . Maybe a private locate gets charged. Anyone know ?

 

[TradeZero_Mohamed]

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.

Unfortunately, that is not possible for us to do. Our rates for locates may change throughout the day depending on demand and availability from our clearing house and vendors.
So far as we understand, there is no market rate for locate securities. A specific locate may cost less for a firm who’s clearing house or vendors have a large supply of the requested locate symbol.

 

[guru]

Generally as I understand it now, the locate fee is something that is determined during specific morning or through the day based on stock availability and provided by outside services that specialize in locating stock. Then a trader shorting the stock will see that locate fee/price and must specifically agree to it and accept it.
Here is a screenshot from TradeZero found via Google:

And here is one from LightSpeed:

And that's when you also pay 7x the locate fee at TradeZero overnight and later 1x the locate fee, but TradeZero may sometimes lose on this if the overnight interest rate is much higher than the locate fee.

On another hand, no one needs to use the locate service and doesn't need to pay that fee, but simply place a limit sell order for shorting a stock and wait to see if the order may get filled some time throughout the day. This is what I do at IB and not pay locate fees, but then I pay the overnight short %interest if I decide to keep the stock short overnight.

In summary, these are two methods of selling stocks short and not necessarily equivalent. Either approach may have benefits for traders, or for the brokerage, while the real money makers are vendors specializing in locating short stocks. One of such vendors seems to be velocitycapitalllc.com

(please correct me if I’m wrong and anyone has additional or alternate info)

 

[Maverick2608]

Well, the short borrow fee rate on ASLN on Interactive Brokers right now is 675%. So if we - like the original poster - took a short position of 180 shares at the price of 5.5, the cost overnight at Interactive Brokers would be 180 x 5.5 x 675%/365 = 18 bucks. The cost at Tradezero according to the original poster was USD 385. That is 21 times more.

That is an extremely bad deal.

 

[Maverick2608]

If anyone has an account at Schwab, Ameritrade, Etrade, Fidelity, Lightspeed, Tradestation or any other broker, would you be so kind to quote what the current short borrow fee is on ASLN so we can compare with the current rate of 675% at Interactive Brokers?

It could be interesting to gauge whether the rates align around a common market rate or whether there is wide dispersion.

 

[NewTraderAdventure]

Well, the short borrow fee rate on ASLN on Interactive Brokers right now is 675%. So if we - like the original poster - took a short position of 180 shares at the price of 5.5, the cost overnight at Interactive Brokers would be 180 x 5.5 x 675%/365 = 18 bucks. The cost at Tradezero according to the original poster was USD 385. That is 21 times more.

That is an extremely bad deal.

Exactly, makes no sense. I see they do display the locate fee on that screen , but not the borrow rate?

 

[zdreg]

Schwab, Ameritrade, Etrade, Fidelity

you can be reasonably assured that this bunch has no shares available. therefore whether it is 600 or 700 or 800% annualized is irrelevant. The fact that IB has it available shows the usual professionalism of the firm compared to the rest of the industry. Get away from the idea that somebody is trying to rip you off. Because of the volatility in the stock and small float. there are very few lenders of the shares. I will bet that most retail shorts are clueless to the available float and to the market capitalization.

 

[Maverick2608]

you can be reasonably assured that this bunch has no shares available.

Thanks for the heads up. I have never had an account with any of them. However, I am surprised that Schwab would be less capable of finding stocks to borrow compared to IB given that Schwab's own pool of stock is much bigger.

(I am in no way suggesting that IB rips anybody off charging 675%. I am suggesting that paying 21 times that amount - as the OP claims was the case at Tradezero - is a very bad deal).

 

[zdreg]

So far as we understand, there is no market rate for locate securities. A specific locate may cost less for a firm who’s clearing house or vendors have a large supply of the requested locate symbol.

Your remark is true, however it is not particularly difficult to determine what your competitors are charging.

 

[zdreg]

Thanks for the heads up. I have never had an account with any of them. However, I am surprised that Schwab would be less capable of finding stocks to borrow compared to IB given that Schwab's own pool of stock is much bigger.

(I am in no way suggesting that IB rips anybody off charging 675%. I am suggesting that paying 21 times that amount - as the OP claims was the case at Tradezero - is a very bad deal).

I don't see that the OP is claiming he was charged 21X. I reread his posts.