1

Is the formula below correct?

[Shares shorted * price sold] * [annual interest rate / 360 * # of days borrowed] = interest charged

Based on the formula, it doesn't seem like interest is compounded.

2

The formula is:

  • (Borrow rate) x (market value of the security)/365

It's a borrow fee rather than interest. The borrow rate and the price of the security can fluctuate daily. It is charged for holding a short position overnight and is calculated daily. Typically, it accrues and is debited monthly.

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