[gregster23]

Hello good Canadians,

I have been doing a lot of day trading (long) in my account at Scotia Itrade for a while now and decided I wanted to try my hand at Short Selling. I opened up the proper account and went to make my first short sell today when the system let me know that it would take some time before I would know if that stock was available to short sell. After calling ITrade they informed me that yes, it does take time as the order is viewed first, then they have to search the system to see if there are shares available - if there are and you have done a market order then they place the trade - which they couldn't give me a timeline on. I had waited 7 minutes on my first trade and it still hadn't been placed so I cancelled it. Obviously for someone trading when seconds count, minutes (or longer?) aren't an option.

Does anyone else deal with a brokerage in Canada that they could recommend that would have these orders placed close to instantaneously? It seems to me that most of the American platforms do (from what I can see when watching people on youtube etc.). Any advice is much appreciated. Cheers.

 

[humble_pie]

perhaps try asking a representative to phone the loan post before you set up your trade?

i don't short normally but once in a blue moon i do short shares as a way of unwinding a complicated option strategy.

i'm working through one right now & it involves a US stock that the software says isn't available to short. But phone the loan desk itself & presto they have the shares for shorting.

ie the online loan post software isn't up-to-date.

 

[gregster23]

Thanks for the tip - I think for the amount I am doing it and the seconds I need that phoning isn't an option - I will try calling around to different brokerages today - again if anyone has first hand knowledge please let me know - so far td Waterhouse sounds like my best bet

 

[humble_pie]

nae nae laddie, tis the big green that has to be phoned

 

[janus10]

I use IB but I short futures which is instantaneous. Not sure how it would be for stocks, but I do remember seeing daily (maybe even more frequently?) numbers of shares for a list of securities that can be shorted.

https://www.interactivebrokers.com/en/index.php?f=shortableStocks&p=shortable

 

[gregster23]

Thank you - I will look into IB as well - I spoke to Itrade again today and talked to someone a LITTLE more familar and apparently it IS instant if they have the stock on hand - so big stocks like Apple, FB, Goog, etc will be shortable - its the smaller companies (of which I am trading) that are not available right away.. so still open to other brokerages if someone has better options. Cheers!

 

[james4beach]

Short selling is a bit awkward for us small retail investors. It comes with tax complications as well, so I have started avoiding it, although I used to regularly short stocks with Interactive Brokers.

Be aware that a hidden cost of short selling is the cost to borrow shares. To short shares, you have to borrow them from your broker (or the open market). Some important questions become... are the shares even available to borrow? What is the interest rate you will pay for such borrowing?

Some stocks have horrendously high borrowing costs. I remember SHLD had something like a 25% annualized borrowing rate at one point. There is a dirty/crooked secondary OTC market in share lending. I suspect that hedge funds make a lot of money in this OTC market.

When you have a short position, shares can also cease to become available and you might be forced to cover your short. I guarantee you that the price of the shares will rise at the time this happens.

Interactive Brokers was quite good because they had a Tool (in the account management menu) to look at availability of stocks to short. You could see how much inventory exists and the borrowing cost (as % annual interest rate).

Now that I've said many negatives... a cool thing about short selling, that I still love, is that it generates cash. It is fundamentally a borrowing/margin activity: you are borrowing shares, but you gain cash. You can indeed hold long-term short positions. It's just a loan... there are certainly cases where you would be happy to pay back the loan (of shares) and in the meantime, benefit from the cash it has generated and made available.

 

[humble_pie]

... There is a dirty/crooked secondary OTC market in share lending. I suspect that hedge funds make a lot of money in this OTC market.

i wouldn't call any OTC loan market that brokers maintain among themselves necessarily "dirty" or "crooked," though.

it's possibly only via the intra-broker loan network that brokers are actually able to obtain some loan shares for clients wishing to short, even when their own house loan post is officially showing that no shortable shares are available.

i've long thought that the brokers that offer margin accounts only - the forum has discussed which brokers these are in other threads - are actually running a profitable loan business on the pipes of shares borrowed from their clients!

i for one don't see anything terribly wrong with this practice. After all, finance has never been a garden of rosebuds. The only thing that could be wrong IMHO is that such practices are not disclosed clearly enough to clients. This is a regulator issue, not an individual broker issue.

the problem is that the regulators will only be vigilent if enough investor/consumers complain. But then, how can the investor/consumers complain, if they don't know, lol.

 

[james4beach]

I see what you mean. I shouldn't have said dirty, but rather... very opaque, with poor transparency & disclosure. You're probably right that the margin brokers are profiting from this; after all, they have all the information about the share supply/demand. The retail investor has nothing -- no data at all, so is borrowing (or lending) blindly.