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- Pre-Borrow for Shorting is only available for Portfolio Margin customers.
- To enable this program, you must log into Account Management and check Pre-Borrow Program in the Trading Programs section of the Trading Permissions area.
The Pre-Borrow Market
- Pre-borrow orders are accepted from 6:45 - 14:45 ET.
- Generally the most active time for pre-borrows occurs between 9:00 and 11:00 a.m.
Rates and Fees
- The indicative rate displays in the data line for the stock in the Lend field. The actual rate to borrow that stock (our standard borrow rate) is computed at the end of the day and will be available on your activity statement.
- Rates are subject to change based on availability of the underlying stock. Standard borrow rates are computed each night and will be available on your activity statement.
- You will pay additional borrow fees for any stock held in excess of your short position.
- The borrow rate is applied to the collateral to calculate the daily borrow fee.
- The borrower is responsible for the daily borrow fee and for collateral on the transaction. The collateral is equal to the settlement price x quantity. The settlement price is 102% x mark price rounded up to the nearest 1.00 with a 1.00 minimum.
- Collateral is returned to the borrower when the borrowed shares have been returned to the lender.
- In the case of dividend-paying shares, since shares are only being lent (not sold) by the lender, dividends paid during the borrow belong to the lender who actually owns the shares. The borrower of the shares must pay dividends to the lender in what is called Payment in Lieu of Dividends.
- A pre-borrow is presumed to anticipate a short sale. If no short sale trade executes within three days of the pre-borrow transaction, a non-purpose borrow results and the shares are returned.
- If the pre-borrow is not followed by a short sale and a previous short on the same underlying exists, the pre-borrow will be applied to the existing short on the following day.
- Only US stocks are available to pre-borrow.
- Orders are only eligible to fill during regular trading hours.
- There is an order minimum of 10,000 USD for all pre-borrow transactions.
- Only market orders are supported for pre-borrow orders.
Note: Pre-borrows can be affected by corporate actions involving the issuer of the shares. Corporate actions that occur when a pre-borrow is already in place may result in borrowed shares that are neither able be used to effect a short sale, nor can returned by the borrower until the corporate action has been completed.
Additionally, in some instances corporate action-impacted securities may be unavailable to borrow, as counterparties may not have available shares until the day after the corporate action has been completed.
Accounts that pre-borrow shares are responsible for paying the lender the amount of any distributions made by the issuer including, but not limited to, dividends (regular cash, special cash, shares), rights/warrants, and spin-off shares. A client may take on additional significant economic exposure and be liable for a substantial payment if the client holds pre-borrowed shares at the close of business on the day prior to ex-dividend date, regardless of the trading position in the account.