Short Borrow Fee

A short borrow fee is the cost of maintaining a short position in an instrument whose underlying has to be borrowed in order to be sold — chiefly single-share CFDs. The provider hedging your short must locate and borrow the stock, and the lender charges for it; that borrow rate is passed to the client, usually as a daily charge on the position's notional value. Unlike financing on a long position, the borrow rate is not a market-wide number. It is set by supply: a widely held large-cap is cheap to borrow and the cost is negligible, while a heavily shorted or thinly traded stock can carry a borrow rate that dwarfs any spread and moves without notice. Some instruments become unborrowable altogether, at which point new shorts are refused and existing ones may be closed. Anyone holding a short share CFD for more than a day or two should check the current borrow rate rather than assume the position's cost is the spread.