Sunday, June 19, 2011

(updated):Barron's article about being punished for shorting Chinese companies

More than a dozen such halts have occurred this year and, as shown in the table at left, they've dragged on for as long as three months. Regulations bar trading in listed stocks during a halt. That leaves stock-option traders unable to exercise, and equity longs and shorts trapped in their positions. But there's a more arcane problem for the short-sellers: Throughout the halt, they must continue to pay interest-like fees on the shares they borrowed to make their short sales. These fees—known as  "negative rebates"—can run at rates as high as 180%, annualized.

Must read article for Chinese short sellers. Here is my question.

Where do you find out what your broker is charging you for shorting the stock? (From my understanding with Interactive Brokers, I am paying the margin 1.6% on my I paying more than this but don't know?)

EDIT: A reader e-mailed me and told me where to find my lending cost on Interactive Brokers.  Go to "Account Management" - click the  "Tools"  in the upper left area of the screen. Then on the click on Short Stock Availability option. There you can enter in the security and find the current cost of borrowing or what they refer to as the indicative rate. The indicative rate is the interest you pay for shorting. 

COGO'S current indicative rate is -0.495 or 0.495% per ANUM. This is quite low, to put in perspective another Chinese RTO Harbin is -26.155 .  As far as I know, COGO has the cheapest indicative rate of any Chinese RTO.  Even China Fire and Security (CFSG) which has a buy out offer from Bain Capital has an indicative rate of -17.748.

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