The cash collateral underlying the security loan from the Stock Yield Enhancement Program and used for determining interest payments is determined using standard industry convention whereby the closing price of the stock is multiplied by 102% and then rounded up to the nearest whole dollar. For example, a loan of 100 shares of a stock which closes at $59.24 would be equal to $6,100 ($59.24 * 1.02 = $60.4248; round to $61, multiply by 100).
How is the amount of cash collateral for a given loan determined?
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What closing price of my short stock is used for calculating daily short stock interest?
The Price column reflects the adjusted closing price of the short stock position.
In determining the cash deposit required to collateralize a stock borrow position, the general industry convention is for the lender to require a deposit equal to 102% of the prior business day's settlement price, rounded up to the nearest whole dollar and then multiplied by the number of shares borrowed. As borrow rates are determined based upon the value of the loan collateral, this convention impacts the cost of maintaining the short position, with the impact being most significant in the case of low-priced and hard-to-borrow shares…
How does Interactive Brokers LLC determine the amount of shares which are eligible to be loaned?
The first step is to determine whether securities are considered fully-paid for or if they are rehypothecated as collateral for a margin loan balance. A broker who finances client purchases of securities via margin loan is allowed by regulation to loan or pledge as collateral that client’s securities in an amount of 140% of the cash debit balance. For example, if a client maintaining a cash balance of $50,000 buys securities with a market value of $100,000, the debit balance will be $50,000. The broker holds a lien on 140% of that balance or $70,000 of securities. Any securities held by the client in excess of that amount are referred to as excess margin securities ($30,000 in this example) and are required to be segregated unless the client provides authorization to Interactive Brokers LLC to lend through the Stock Yield Enhancement Program. Note that only $30,000 of securities is eligible to be lent via SYEP…
How is the amount of collateral for a loan determined?
The collateral amount underlying the security loan via the Stock Yield Enhancement Program and used for determining interest payments is calculated using standard industry convention. In the US market, the closing price of the stock is multiplied by 102% and then rounded up to the nearest whole dollar. The collateral is marked-to-market daily and the activity will be displayed on your statement…
What is the purpose of the Stock Yield Enhancement Program?
The Stock Yield Enhancement program provides customers with the opportunity to earn additional income on securities positions which would otherwise be segregated (i.e., fully-paid and excess margin securities) by permitting IB to lend out those securities to third parties. Customers who participate in the program will receive a portion of the interest paid on the cash collateral by the borrower as loan compensation for any day the loan exists and will receive cash collateral to secure the return of the stock loan at its termination…