Uncompetitive margin rates among online brokers

Sig said:
I never had IB do that on boxes like this but I suppose it is a risk. The idea was more to do it at other brokers in order to get the best of both worlds, IB's admittedly low margin rates without their horrendous "customer service". I used to do this at OptionsXpress which is now Schwab, can't imagine it wouldn't work at Schwab now.
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Not to barge in on this thread, I have created a fresh one to specifically debate box spreads at Schwab.

https://www.elitetrader.com/et/thre...-borrow-from-a-box-spread-with-schwab.359127/
 
Sig said:
I never had IB do that on boxes like this but I suppose it is a risk. The idea was more to do it at other brokers in order to get the best of both worlds, IB's admittedly low margin rates without their horrendous "customer service". I used to do this at OptionsXpress which is now Schwab, can't imagine it wouldn't work at Schwab now.
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i did this with my broker. It saved on my margin expense. However, it sucked up a lot of credit (gross balance sheet the broker afforded me).
 
Credit is the main reason a lot of brokers don't like clients doing this (ignoring for a moment that it eats into profit margins for many retail brokers who mark up margin rates)

newwurldmn said:
i did this with my broker. It saved on my margin expense. However, it sucked up a lot of credit (gross balance sheet the broker afforded me).
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DiceAreCast said:
I am not talking about your idea, I am talking about after obtaining cheaper funding you still get raped by many other retail brokers, such as via sec lending rates if one wants to short individual names. The reason of doing all this is to avoid paying high margin rates and obviously avoiding IB. My point was that one still gets bitten by many other retail brokers through various insanely marked up fees.

I wonder how much margin rates are even with slightly more reputable firms like the one Robert M is working for.
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Got it. Yeah, the whole shorting market is very opaque and I think a big money maker for brokers. If nothing else they make a ton of risk free money lending their margin customer's stocks. I had heard, but can't remember the details, that some smart entrepreneurs set up a marketplace to add some transparency and reduce costs in the shorting market and they were bought out by a consortium of brokers who then shut it down.
If the stock has options you can do a synthetic short and avoid all that, but I understand that often the stocks you want to short don't have options.
 
The absolutely largest profit driver for retail brokers (according to foot notes in their reporting) is margin lending, so your idea has a point for those brokers who charge 7 or 8% in the current rate climate. I was just adding that clients get usually taken for a ride with brokers who mark up their margin loans on many other fees and cost as well.

Sig said:
Got it. Yeah, the whole shorting market is very opaque and I think a big money maker for brokers. If nothing else they make a ton of risk free money lending their margin customer's stocks. I had heard, but can't remember the details, that some smart entrepreneurs set up a marketplace to add some transparency and reduce costs in the shorting market and they were bought out by a consortium of brokers who then shut it down.
If the stock has options you can do a synthetic short and avoid all that, but I understand that often the stocks you want to short don't have options.
More...
 
Sig said:
Got it. Yeah, the whole shorting market is very opaque and I think a big money maker for brokers. If nothing else they make a ton of risk free money lending their margin customer's stocks. I had heard, but can't remember the details, that some smart entrepreneurs set up a marketplace to add some transparency and reduce costs in the shorting market and they were bought out by a consortium of brokers who then shut it down.
If the stock has options you can do a synthetic short and avoid all that, but I understand that often the stocks you want to short don't have options.
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I think there have been a few attempts at creating transparency around locates.

when E*TRADE bought brownco in 2005 it was literally for the margin account business.
 
Does rehypothecation of which country's shares depend on the currency being borrowed?
i.e. 'GBP margin loan results in UK shares hypothecation' while 'USD loan results in US shares hypothecation'.

I am trying to avoid Payment in Lieu of Dividends on my US shares by using cross currency funding.

The only drawback with GBP loan is the rehypothecation in UK is not limited, like in the US the max of which is up to 1.4x. However, if I don't have UK stocks, I don't have to worry too much on such limitless UK rehypothecation?
 
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