GLOSSARY // Market Structure
Borrow Fee
The borrow fee is the annualized interest rate a short seller pays to borrow shares, charged daily against the position's market value. Easy-to-borrow large caps cost 0.25-1% a year — background noise. Hard-to-borrow squeeze names have printed rates of 100-700% at peak demand.
The rate floats with supply and demand for the stock loan, repricing daily. Brokers pass through most of the fee to the share lenders (often index funds and other custodial holders) and keep a cut. Your broker shows the current rate at order entry, but the rate you pay tomorrow can be multiples of today's.
For short-term trades the fee is a rounding error; for a thesis short held months, it compounds into a real hurdle. A 50% annual borrow rate means the stock must fall about 4% a month for the position just to run in place.
A short seller holds 5,000 shares of a $20 stock, a $100,000 position, at a 60% borrow rate. Daily fee: $100,000 x 0.60 / 360 = $166.67. Over a 45-day hold that is $7,500 — so even though the stock fell from $20.00 to $18.90 ($5,500 of gross profit), the trade lost about $2,000 net.
Related terms
Educational only — not financial advice. Definitions simplified for clarity; markets are messier than definitions.