Why are brokers willing to borrow stocks to short?
1. You can earn interest.
Investors need to charge a certain percentage of interest when borrowing shares from securities companies. At present, the annual interest rate of margin financing and securities lending of general securities companies is 8.35%, and the interest of margin financing and securities lending for one day is 8.35% ÷ 360 of the total margin financing and securities lending.
2. You can earn trading commission.
Investors need to charge a certain commission when they borrow money for stock trading. The commission rate is subject to the provisions of the brokerage firm, and the transaction commission is collected in two directions, that is, both the buyer and the seller collect it.
3. Retain customers
If investors want to increase leverage, but brokerage A doesn't, investors will choose brokerage B, and B will transfer most of the funds to brokerage B. After the investors' funds are transferred out, brokers will not only lose interest and handling fees, but also lose customers.
Generally speaking, there are few sources of securities and bonds in the hands of brokers, because investors can make profits by shorting, while brokers will lose money. In addition, shorting stocks is risky, and investors need to be able to make accurate judgments on the trend of stock prices. They make money if they judge correctly, and lose money if they judge wrongly, which may be even worse.