Short Rebate
A short rebate is interest paid back on the cash collateral from a short sale. For easy-to-borrow stocks it can be positive for large institutions; for hard-to-borrow stocks the borrow fee can make it negative. Retail brokers often pay no rebate.
When you short, the sale cash is held as collateral and earns interest. A short rebate is the part of that interest paid back to the borrower. For easy-to-borrow stocks it can be positive for large clients, while for hard-to-borrow stocks the fee can make it negative. Many retail brokers pay nothing, and terms differ by broker and country.
- Category
- Market Structure
- Reading time
- 3 min
- Also called
- Rebate rate, Short stock rebate
- Updated
Short rebate in plain words
The cash collateral from a short sale earns interest, and the portion returned to the borrower is known as the rebate rate.1
Whatever interest isn't paid back is the lender's fee.1
If the borrowing fee is higher than the interest earned on the proceeds, the rebate turns negative.2
How a short rebate is worked out
Short the stock
Sale proceeds become collateral.
Collateral earns interest
The lender reinvests the cash.
Rebate paid
Find the rebate: the part of the collateral interest returned to you.1
Lender keeps a fee
The rest is the lender's fee.1
Easy vs hard to borrow
Easy-to-borrow (general collateral) stocks are liquid and widely available, so rebates tend to be better.2
Watch for negative
Watch for negative rebates when borrowing fees exceed the interest earned.2
Worked examples
Example 1 — Positive
+3,500Hypothetical: proceeds 100,000, interest 4%, fee 0.5%, 1 year.
| Rebate | 100,000 × 3.5% = 3,500 |
Part of the interest on the collateral came back to the short seller as a rebate.1
Example 2 — Negative
−5,200Hypothetical: interest 4%, borrow fee 30%, proceeds 20,000, 1 year.
| Net | 20,000 × (4% − 30%) = −5,200 |
The borrow fee was higher than the interest earned, so the rebate was negative.2
Example 3 — Retail account
Often noneA small hypothetical account shorts an easy stock.
| Rebate | Often 0 |
Some brokers pay a rebate on easy-to-borrow stocks as an incentive, but many retail brokers pay nothing.3
Short rebate vs borrow fee
| Aspect | Short rebate | Borrow fee |
|---|---|---|
| Direction | Paid to you | Paid by you |
| Easy stocks | Can be positive | Low |
| Hard stocks | Can be negative | High |
| Depends on | Interest rates | Supply and demand |
Where short rebates matter
Short costs
Carrying a Short Selling.
Rates
Linked to the Interest Rate level.
Crowded shorts
High Short Interest names.
Fees
Part of Trading Fees and Commissions.
Advantages and disadvantages
Advantages
- Can offset short costs.
- Shows true carry of a short.
- Larger accounts may earn interest.
Disadvantages
- Often zero for retail.
- Can turn negative.
- Changes with rates and demand.
- Terms differ by broker and country.
Going deeper
Read as far as you need. Each level builds on the one before it.
Common mistakes
Assuming you earn interest
Check your broker.
Ignoring negative rebates
They cost money.
Ignoring rate changes
Rebates move with rates.
Holding hard-to-borrow shorts long
Costs compound.
Check your understanding
Test yourself before moving on. Each answer comes with an explanation.
Key points to remember
- Short proceeds earn interest as collateral.
- The rebate is the part paid back to you.
- Lenders keep a fee.
- Hard-to-borrow stocks can have negative rebates.
- Retail brokers often pay none.
Frequently asked questions
Do retail traders get rebates?
Why are some rebates negative?
Are rebates fixed?
Further learning
- Short Selling
Shorting basics.
- Interest Rate
Rate drivers.
- Trading Fees and Commissions
Total costs.
- Short Squeeze
Hard-to-borrow risk.
Sources
This article is written in our own words. The sources below support the specific facts, rules and figures marked with a number in the text. Links open the original publisher’s page.
- U.S. SEC. Reporting of Securities Loans (Proposed Rule, Release 34-93613) (opens in a new tab) Checked .
- Interactive Brokers. Short Sale Cost (opens in a new tab) Checked .
- Interactive Brokers. Rebate (IBKR Glossary) (opens in a new tab) Checked .
Educational content, not financial advice. Examples use hypothetical prices and simplified costs; actual fees, margin rules and regulations vary by broker, market and country. We are not affiliated with any publisher linked above. Last reviewed . Report an error or request a source credit.