TABLE OF CONTENTS
- What is a Hard-to-Borrow Fee?
- How do I know if a stock is hard-to-borrow?
- Where can I see a Hard-to-Borrow Fee Rate?
- Elevated Buying Power Requirements for Options Spreads
What is a Hard-to-Borrow Fee?
Heavily shorted stocks may be subject to a fee
A lot happens in a split second when you line up a short stock order. Our clearing firm has to locate the stock position before you're able to short it. When there is a lot of demand to short a stock, then locating shares can be challenging. As a result, our clearing firm may assess a hard-to-borrow (HTB) fee.
Hard-to-Borrow Fees also apply to assigned short calls, resulting in short stock. That said, it is not uncommon for short calls to be assigned early due to heavy short interest. To learn more about potential reasons for early assignment, please click here.
When an account holds a position that is subject to an HTB fee, it will display in the History tab as a debit Money Movement. HTB fees are charged daily based on settlement. The example below illustrates an HTB fee charged on an account short UNG shares. Additionally, accounts subject to HTB fees will see a pending cash entry list on the account. Pending Cash entries listed due to an HTB fee will deduct from the account's buying power.
How do I know if a stock is hard-to-borrow?
Enter the symbol at the top of the desktop platform
An underlying that is hard-to-borrow and potentially subject to an HTB fee will indicate in yellow at the top of the platform, above the name of the underlying.
Where can I see a Hard-to-Borrow Fee Rate?
Displayed after clicking review and send
If you want to short a stock and want to see if there is an HTB rate or availability, then it will display during order entry after clicking Review and Send. The HTB rate shown is an annualized rate. Additionally, if you already have an open short stock position, then our clearing may assess and/or change the HTB rate at any time, even though there may not have been one initially. HTB fees are charged daily and are passthrough. Also, if shares are not available to short, then the notification will be displayed instead of the HTB rate.
Elevated Buying Power Requirements for Options Spreads
Underlyings that have a high HTB rate will have an elevated margin requirement
When trading any short credit spread, the typical buying power requirement is the credit received minus the spread width, multiplied by quantity. However, when trading options spreads on an underlying with a high HTB rate, then the margin requirement will be changed to the debit required to buy that spread back as determined by 1.1X (110%) the natural price. Since HTB rates can be levied or increased at any time, elevated margin requirements will apply to any existing positions that previously may not have been hard-to-borrow.