IB Short Fee Calculation

[GlobalMacro90]

Making sure I am thinking about this correctly.

On IB's SLB tool, I see a security with a fee rate of 3.0% and a rebate rate of -1.0%. Since the rebate is negative, I (as the borrower) would owe that to the lender correct? So in effect my cost for this short position is basically 4.0% annualized?

 

[LeszekXM]

As a owner of the security you'll get 1%. If you are a borrower then you have to pay 3%.

 

[zdreg]

it depends on the broker. most brokers will keep it the 1% for themselves.

 

[elt894]

3% is the amount you pay to borrow the security, but you can also earn interest on your short sale proceeds. The rebate rate is IB's benchmark rate (currently 1.92%) minus the borrow rate. This is the maximum amount you could theoretically be earning net of borrow fees. However, in reality you'll earn a lower rate according to the table here. If your total short sales proceeds are less than 100k, you'll be paying the 3% and earning no interest.

 

[GlobalMacro90]

Gotcha thanks for the help.

So lets say in this example I short $10,000 worth of a security.

I would basically owe the lender (0.03/360)*10,000 or 83 cents per day / $300 per year?

 

[elt894]

Correct. If you want to be picky, the 3% fee is based on the collateral amount, which will be at least $10,200. https://ibkr.info/node/1146

 

[GlobalMacro90]

Right, gotcha. Appreciate the help!