sam
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Posts: 123
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Post by sam on Feb 27, 2023 1:23:28 GMT
We all know cost of margin borrowing costs for clients at different brokerages. These are collateral loans against your portfolio assets.
Finance industry thrive of spread trade. What is cost of providing those loans to brokerage itself? Is it Fed fund rate or LIBOR (former) or SOFR (current) rates?
From where brokerages get money? Is it money from customer cash deposits?
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Post by yogibearbull on Feb 27, 2023 1:38:35 GMT
Margin loans are profit centers for brokerages. Much of the $s come from the cash held in brokerage accounts. Not all provide m-mkt funds for core/settlement fund (like Fido, Vanguard, etc). The biggest one stiffing customers on this is Schwab - its m-mkt funds are on T+1 settlements. In fact, BoA/BAC downgraded Schwab citing this issues and that significant sideline cash was flowing out of Schwab as many have multiple brokerage accounts. www.fool.com/investing/2023/02/22/this-financial-giant-got-a-rare-double-downgrade/ |
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sam
Lieutenant
Posts: 123
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Post by sam on Feb 27, 2023 1:48:18 GMT
Fidelity margin rates are neither lowest nor highest.
Whenever I deposit Cash into Fidelity and that cash goes to particular MM fund of my liking. Manager of fund invest those $$ in very short term bonds.
So whenever I borrow money from Fidelity as Margin Trading, from where Fidelity (in general) getting money and at which rate (Fed fund rate or SOFR) in general? Or Fidelity in turn goes to Money Market Fund manager such as Prime funds to borrow money and lend it me? Or they have their own cash or they go outside to borrow money to be provided to their clients as Margin loans?
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sam
Lieutenant
Posts: 123
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Post by sam on Feb 27, 2023 1:58:35 GMT
One of lowest Margin rates are at IBKR.
Their interest rates (from their website) for IDLE cash is like 4.08% for account NAV of $100K or more and smaller account their interest rate is half of that. But their margin rates are like 6-7%. and much lower for big guys ($200 Million Margin balance, I guess mostly Hedge funds).
So we know what is their spread trade for Margin loans.
In case of Fidelity, if they are lending out at $12% but what is their own cost (in general)?
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