Your broker is lending out your shares
Someone is being paid to lend your shares to people betting against them. Check whether it is you or your broker.
Know what is happening to your assets while you sleep.
How Your broker is lending out your shares works, in one picture
The same argument as the text, as a chain. Each step is what makes the next one possible.
The fee you never see
You buy at the ask and sell at the bid, so you are down the spread the instant you trade. In an illiquid stock it dwarfs any commission you thought you were avoiding.
- 1
Short sellers need to borrow shares, and yours are available
A short seller must borrow a share before selling it. That supply comes from long-term holders, via brokers and custodians. If you hold shares in a general account, they are a likely source.
- 2
The lender earns a fee, and it may not be you
Borrowers pay to borrow, sometimes a great deal for a heavily shorted stock. Many brokers keep most or all of that fee. Some share it. It is worth knowing which yours does, because on a hard-to-borrow name the sums are not trivial.
'Free' brokerage is often funded partly here. Again: find the revenue line.
- 3
While on loan, you are a creditor, not an owner
You hold collateral and a claim, rather than the share itself. In the ordinary course this is invisible and harmless. If the borrower and the collateral both failed at once, it would not be.
- 4
And you may lose your vote
A lent share's voting right generally goes with it. If a contested vote matters to you, that is a real cost, and it is usually possible to opt out of lending.
You know whether your broker lends your shares, and who keeps the fee.
Read next
Someone is being paid to lend your shares to people betting against them. Check whether it is you or your broker.
Every one shows its exact method, and the circumstances in which it is wrong. Free, and no account to look.