Rebate Rate

In a cash-collateralised stock loan the borrower posts cash with the lender, usually a little more than the market value of the shares. That cash earns interest, and the lender passes part of it back to the borrower as the rebate. The rebate is therefore the short-term interest rate less whatever the lender keeps as its fee for supplying the stock.

The arithmetic decides who pays whom. Where the stock is easy to borrow the lender's fee is small, so most of the interest flows back and the short seller earns a positive rebate — the position generates income while it is held. Where the stock is scarce the fee exceeds the interest available, the rebate turns negative, and the short seller pays the difference. A negative rebate is the same economic fact as a high borrow fee, expressed from the other side of the trade.

Because the interest component tracks short-term rates, monetary policy changes the carry of every short position in the market. When the RBA cash rate is high, collateral earns more and shorting is cheaper to fund; when it is near zero, the rebate is thin and the borrow fee dominates. Sellers running large books notice this as a portfolio-wide cost, not a stock-specific one.

Not every loan is cash-collateralised. Where the borrower posts government bonds or other securities instead, no rebate arises and the lender simply charges an explicit borrow fee. Australian institutional lending uses both structures, documented under a Global Master Securities Lending Agreement, with the choice depending on the counterparties and the collateral each prefers to hold.

Rebate rates are bilateral and confidential. They are negotiated between the borrower, its prime broker and the agent lender, and are not disclosed in any public ASX or ASIC dataset. The published short position figures show what has been borrowed and sold, but reveal nothing about the rate at which it is being financed.