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Stock borrowing costs


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7 hours ago, Ranks007 said:

Does anyone know how the stock borrowing costs are calculated on say Qantas when you short via cfds..

Hi @Ranks007,

You can find how the borrowing cost on this page here.

LIBOR is calculated according to the currency of the underlying instrument.

If you’re long, you pay LIBOR (or the equivalent interbank rate). If you’re short, you receive it.

 

Formula: Number of contracts x value per contract x price x (2.5%* +/- LIBOR%*) ÷ 360

Example:

1) You’re long 1500 contracts on Commonwealth Bank of Australia
The contract value is AUD 1
The closing price is 83.90
The 1-month AUD LIBOR rate is 1.89%

Cost = 1500 x 1 x 83.90 x (2.5% + 1.89%) ÷ 360

= A$125,850 x 4.39% ÷ 360

= A$15.35 overnight charge

2) Imagine you’re short 2 contracts on the US Tech 100. The contract value is $20.

The 10:00 PM (UK time) price is 13200.00. The 1-month US LIBOR rate* is 0.11%. Our admin fee is 2.5% annually.

Cost = 2 x $20 x 13200 x (2.5% - 0.11%) ÷ 360 = $528,000 x 2.39% ÷ 360 = $35.05 overnight charge.

*We use US LIBOR and the 360-day divisor since you're trading the US index in USD

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I hope that it helps !

All the best - Arvin

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Hi Alvin,

Thanks for the reply.

I understand the carry/libor costs but I’m trying to understand the stock borrowing costs (seperate to carry/lib or)

I recently shorted 6000 qantas cfds and was charged $2.13 over a weekend period for “stock borrowing”

I dont care about the amount charged but I’m just trying to understand this particular algorithm..

Kind Regards

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Hi @Ranks007

Thanks for the question

Daily borrow cost is calculated as follows:

Borrow Cost = Number of shares x Price x Borrow Premium(%)/ 365

I see that you were charged for 3 days because you held the position through a weekend. The borrow premium as it stands on Qantas is 0.9%. I hope this helps in reconciling the charge. 

Many thanks

Anda

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