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stock borrowing costs on short spread bet position

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I recently started trading spread bets and went short on a UK company DFT. I expected to be charged daily Short Interest cost for every night the position was open. I was charged that but was also charged  an additional Stock Borrowing cost for each night the position was open. It was almost 3 times the amount charged for Short Interest. Any idea what Stock borrowing costs is for? Many thanks.

Edited by shamir
making it more understandable

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Hi Shamir,

So as you mentioned, on cash positions you will be charged an overnight funding charge for every day you hold the position through 10 pm UK time. On top of that, when you enter into a short position on shares, there is a borrowing cost. this is because when you enter into a short position on shares, you are essentially borrowing the stock as you do not physically own it, therefore you will need to fund the ability to borrow the shares to be able to open a short position. This rate is based on a borrow premium that we receive from our brokers which we then add an IG fee of 0.5%.

 

Regards,

Daniela

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2 hours ago, DanielaIG said:

Hi Shamir,

So as you mentioned, on cash positions you will be charged an overnight funding charge for every day you hold the position through 10 pm UK time. On top of that, when you enter into a short position on shares, there is a borrowing cost. this is because when you enter into a short position on shares, you are essentially borrowing the stock as you do not physically own it, therefore you will need to fund the ability to borrow the shares to be able to open a short position. This rate is based on a borrow premium that we receive from our brokers which we then add an IG fee of 0.5%.

 

Regards,

Daniela

Thank you Daniela.

I understand the interest charges for opening a short position. I was not sure about what you term 'an overnight funding charge' as my trading history shows the two charge types to be 'short interest' and 'stock borrowing'. I assume what the trading history calls 'stock borrowing' you have termed it 'overnight funding charge'. 

I was more confused, having opened same short position in same company DFT with the same stake with two different Spread Betting providers, I was charged 04 pence per night short interest by both providers but the other provider did not charge any 'stock borrowing' or 'overnight funding charges'.

And IG Costs and Charges Documentation is not very clear about all the costs incurred when going short on UK share on the spread betting account.

I understand now that different providers have different charging policies.

Kind Regards

Shamir

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Hi Shamir,

Just to clarify:

-Short interest: overnight funding cost for holding the position after 10pm UK time

- Stock borrowing: commission for "borrowing" the share in order to go short (will only apply to share positions on leveraged accounts)

Both charges will charge a 3 day commission on Friday in order to cover the weekend.

Hope this clears it up a bit more. If you have any more queries don't hesitate to ask!

Regards,

Daniela

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