Short Sale Rebate Fee
When you borrow money from a lending institution, you agree to pay interest on the loan based on certain conditions such as the loan amount, availability, etc. Similarly, when you borrow shares of a stock, you may be charged interest based on the underlying lending conditions of the security in the short sale - primarily the availability of shares. This fee is referred to as the short sale rebate fee. Typically, shares with high availability will have a lower interest rate and shares with low availability may have a higher interest rate.
The short sale rebate fee is calculated as:
(market price X number of shares X indicative rate)/360 = Short Sale Rebate Fee
To see any interest charges related your short positions, visit the Account History section of your account and look for the field labeled “Short Sale Rebate Fee.”
In addition to impacting the interest rate of a short position, the availability of shares also factors into the settlement of a short sale. Stocks that are hard to borrow have a higher likelihood of being unavailable on the settlement date and incurring a forced buy-in throughout the time you hold the short position. Before you enter into a short sale, you should consider how the availability of the shares you're shorting and the potential short rebate interest charges may impact your strategy.
For more information about the short sale rebate fee or to learn about the indicative rate for a certain security please contact your local Scottrade team. Your Scottrade team will also provide an itemized list of the fees charged for any of your short positions that are subject to a fee upon request.