Unborrowable - short dailies only by IG Index

alphahunter

Member
64 0
It seems that IG Index has considerably curtailed the number of shares that can be shorted. Surprisingly, this also applies to Paris-listed stocks that have a SRD facilities (Service de règlement différé, whereby the settlement/delivery is done at month-ends), such as Sodexo (Compass peer)

Has anyone got the same impression? Could it be that IG keep its short capacity for the CFD platform? Any idea anyone? Thanks
 

0007

Senior member
2,376 660
I notice with USA stocks that some of my recent best selections for shorting sometimes are not available for shorts but Ok for a loss-making long. IG aren't stupid! It does at least confirm my assesment. No worries - move on, plenty more stocks to choose from.
 

alphahunter

Member
64 0
0007,
It looks like we are a bit like-minded.

I agree, plenty of stocks to short but if you trade around your long-term short positions, you may not be able to come back once you've part-covered on a tactical basis. The only way around this IMVHO is to take a trading long position on the CFD platform while keeping the short SB intact to neutralise the short-cover rally. But that means extra funding cost, assuming SB spread = % CFD commission.

Is anyone else experiencing the same dilemna?

Kuehne & Nagel International AG : Données financières, estimations et prévisions pour Kuehne & Nagel International AG | KNIN | Zone bourse
SODEXO : Données financières, estimations et prévisions pour SODEXO | SW | Zone bourse
 

capitalspreads

Experienced member
1,452 79
i hate to defend IG but... the reason stocks are/or become unavailable to short is much more prosaic

in the case of many european stocks this is because the regulator in those countries makes it illegal (and therefore we must all follow suit)
in the case of US stocks we cannot short stocks with our US brokers unless they have the ability to lend those stocks to us. (the rules are different in the US from the UK). So if we cannot hedge a short then we might not allow a client to short them either.

I realise that this is rather more boring than a good old conspiracy theory but... not all stories can be written by Jeffrey Archer

Simon
 
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alphahunter

Member
64 0
I have just finished comparing on excel the IG's lists of stocks in August 2011 and January 2013 for the UK market. About 3/4 of the ones that could be shorted in 2011 can't be so anymore. A large proportion of the ones that can be shorted today are short dailies only, which is not interesting for mid-caps and smaller cos given the large bid-offer spread in their share price.

Capitalspreads,
I don't believe in conspiracy anyway nor experienced manipulation except the occasional and temporary skew in the prices quoted around the mid. But back to main topic, is it the recent ban for naked shorts in Europe that has made "borrowing" from IG so restricted or is it a commercial or risk-management decision? Has Capitalspread cut the numbers of stocks available for short as well?
 

capitalspreads

Experienced member
1,452 79
alpha hunter

if shorting a French stock is banned by the french authorities then capital spreads follows suit. We are all in Mifid and must follow the rules. Same for Ireland/Spain/Italy etc.

We must not get into a situation where we cannot hedge our (your) risk. Our brokers will not lend us stock and so Capital SPreads would be running an uncoverable risk. (not uncovered.. which is a trading decision... but "un-coverable" ... which is not permitted by our own risk rules)

Simon
 

alphahunter

Member
64 0
Thanks Simon, I understand these points and have always understood them but that is not the question I am raising if I may. Neither the French authorities nor the UK ones are banning borrowed shorts (the Irish/Spain/Italy/French you are referring goes back to 2010 then 2011, for financial stocks only and for a few months).

It used to be possible to short GBP 50m -100m market cap stocks, it is no longer.

So I will repharase my question: has there been any recent regulatory changes - let's say in the UK not to get side-tracked - that has dramatically restricted borrowing shares by spreadbetting/CFD companies from (index tracker/pension fund) institutions via brokers? Or are these index trackers / pension funds no longer willing to lend shares and earn 20bp extra for a reason that I ignore? Or is this just IG willing to shrink the number of un-hedged positions and move towards a risk-management policy akin to Capitalspreads?

I would be interested to read from an IG representative here rather than through their helpdesk that is unlikeliy to get me anywhere.

Alphatracker
 

SpreadBeta

Junior member
41 13
Alphahunter,

I short a least 2 UK Smallcap stock via FP Markets that are between 50m and 100m so I dont belive there is a UK restriction/ban on shorting such stocks. I used to short them both via IG but they no longer allow shorting of either of them. (since approx November 2012 I think)

I guess it was costing IG too much to borrow these smaller (<£100m) companies stocks and so it has simply (for commercial reasons) decided to removed the shorting capablity for smaller stocks from from their platform. (not for a legal reason)
 

alphahunter

Member
64 0
Spreadbeta, that makes sense and if confirmed, that would annoy me hugely as I do mostly long-short. I can deal with alpha risk, not with the macro/QE/political vane.

First time I read about a DMA-based spreadbetting platform. Are you happy with FP Market?

Simon, would you have a excel list of stocks that can be shorted with Capitalspreads? (UK, US, Europe)? Thanks.

Alphatracker
 

capitalspreads

Experienced member
1,452 79
Alpha

in the UK we have no restrictions at the moment... but if a client wished to short a huge trade in a small cap then we might put a limit on it. We have never actually done so but we reserve the right. But then again we do not quote an enormous number of small caps anyway.

In the US a spread sheet would be useless as this changes every single day depending on what is available to be borrowed.

In Europe you will find shorting restrictions on Banking Stocks, some Insurance, Life Funds etc (i.e mainly financials). The only notice you will get is if you try to short them and then you will get a notice saying 'sorry' or words to that effect.

Simon
 

SpreadBeta

Junior member
41 13
Alpha hunter, yes I am very happy with FP Markets (I also looked at capital spreads as recomended by a number of people on this forum, but they were not able to offer the specific stocks I was looking to trade). FP markets are a bit like Prospreads in that they enable you to place limit orders in between the bid and ask and they will be filled if the stock trade at/thru that level. Basically on the smallcap stocks it means that u can end up with smaller spreads / costs.

The FP platform is a bit more complex than most SBs but that is because it started out as a CFD DMA platform that they have modified for their SB product.
 

alphahunter

Member
64 0
Thanks Simon, I usually take a couple of days, sometimes more, to research these small and mid-cap stocks in which I take a short position up to £10,000 only and tend avoid the ones already heavily shorted by HF (and I usually hold the positions for a week to say a over couple of earning announcements). So knowing only at the time of placing a trade which one can and which one can't be shorted would be too late. Hence the list of stocks available for shorts.

SpreadBeta, that's very helpful and I have now browsed the FP thread. Last question on FP, I've seen that there is a demo on youtube, but as a user, would you say that their DMA-SB platform is as intuitive as a regular DMA-CFD one (I'm thinking of IG Markets L2 Dealer here)?
 

SpreadBeta

Junior member
41 13
Alpha hunter, I would say their platform is not quite as dedicated to its purpose as IG cfd offering, you will probably find that u only use 50% of it as some bits are cfd specific. However one you get use to it it's quite easy to use & for me the cost savings and control of the SB positions it allows me more than compensate
 
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