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SharePlanner (< 20)

Trade King Is Ripping People Off with Hard-To-Borrow Fees for Shorting Stocks



November 15, 2010 – Comments (2)

I was made aware this morning by one of the people in the SharePlanner chat-room that they are being charge astronomical "Hard-To-Borrow" fees for shorting stocks. Even for a lot of your regular, "run-of-the-mill" stocks are being charged a high percentage fee tagged with shorting them. This is troublesome to me, especially considering that unless you call a representative at TradeKing prior to placing your trade and ask, you have NO WAY of knowing whether or not you are going to be charged an unbelievable percentage fee or not.

What is even crazier, is that they might tell you that on the day you place your trade the fee is only 2%, but then the next day you may get an email AFTER you are in the trade and inform you that your Annual "Hard-to-Borrow" fee has increased to 100% or more annually. Honestly that is one of the most absurd things I have ever heard of a brokerage firm doing, and when I questioned them about, they were clearly "business as usual" about it. So if you think I am making this stuff up, just check out my transcript of my chat with these folks. There are even people fussing about this one their own website.

This messes up people's ability to trade in the equity markets, and the job of a brokerage firm is to enhance the "ease-of-trading" not increase the difficulty of it. Some brokerage firms get that, and clearly TradeKing doesn't. So if you are with TradeKing and your trading strategy involves shorting stocks, then I would take your services elsewhere immediately. 

I haven't seen something as crazy as this, since the TSA started groping people legally for refusing full-body scans at airports. 

Here's my conversation with a TradeKing representative.

2 Comments – Post Your Own

#1) On November 16, 2010 at 1:33 PM, TradeKingSupport (< 20) wrote:

Mr. Mallory,

We apologize for any confusion our hard-to-borrow policy has caused. Unfortunately hard-to-borrow fees are a reality in the industry due to the current economic times. These types of fees are standard across the industry and we want to make sure that our clients are aware of the possible fees that they may be subject to. This is why we are upfront about the fees on our website. In addition to providing a warning message on our trading page we also list out in detail under our FAQ the manner in which our short sale policy works. Below I have provided a link to this section of our website.

Hard-to-borrow fees can fluctuate depending on the demand for the shares. Due to this we have a policy to contact our clients and possibly close out the position should the hard-to-borrow fee go above 3%.  However, if a client is willing to accept the higher fees we would accept written authorization stating this. Since some clients might be willing to accept a hard-to-borrow fee above 3% we want to provide them with the opportunity to maintain the position should they choose.

Clients can also call us prior to a trade to see what the current hard-to-borrow fee is on a security. If anyone has a question regarding our policy or a possible hard-to-borrow fee please call us at 877-495-5464. We are happy to answer any questions.

Best regards,

Stefan McVeigh
TradeKing Customer Support

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#2) On February 18, 2013 at 4:22 PM, getrichdietrying (83.13) wrote:

This is why.

"So what does Etrade, Scottrade, and TD-Ameritrade all have in common? They all use the clearing firm Penson Financial. A clearing firm is an organization that works with brokers and exchanges for your trading transactions. They are the ones that control the shares available to short, etc.

The problem is that there are so many brokerages and accounts tied up with this specific clearing firm (Penson Financial) that shares are very very very limited because different brokerages are asking for shares left and right."


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