Does IG Use Client Shares for Shorting?

[Birty]

Pretty much as the title states. 

A particular stock I am invested in (via IG.com) has over 8% of its share number being shorted for at least the last 4 months.  I am just wondering whether IG allows some of its clients to use shares owned by it's other clients for shorting? 

 

Cheers!

[OfentseIG]

11 hours ago, Birty said:

Pretty much as the title states. 

A particular stock I am invested in (via IG.com) has over 8% of its share number being shorted for at least the last 4 months.  I am just wondering whether IG allows some of its clients to use shares owned by it's other clients for shorting? 

 

Cheers!

Hi @Birty

Thanks for reaching out. This only involves clients trading in leverage accounts and not in share dealing/ISA accounts. We operate on a hedging model. 

Mostly, our clients offset each other’s positions. For example, if client A buys one lot of the FTSE and client B sells one lot of the FTSE, both sides of the trade are covered. This means we’re not exposed to the profit or loss of either client. Instead, we make our money via the spread (ie the transaction fee) that each client pays to trade.

Sometimes, a large majority of clients will trade in one direction. When this happens, we’ll protect our exposure to risk by hedging in the underlying market. For example, if client A and client B both buy the DAX, we may buy actual DAX futures. This then covers the amount we’ll pay out if both clients are successful.

All the best, 

OfentseIG

[Birty]

Thank you for answering this query fentseIG.

Cheers and have a great day!

 

[Agarwal]

Thank you for raising this important question in the forum. It's great to see active discussions about the practices of brokers like IG. Understanding how brokers handle shorting and the utilization of client shares is crucial for traders and investors. Hopefully, someone with relevant knowledge or experience can shed light on this matter. Initiating conversations like these helps the community gain insights and make more informed decisions. Keep up the engagement and let's continue learning together!