I don't think that this policy (charging interest on the unrealized loss on a short) is unreasonable. I don't think it's a "raw deal". It compensates your broker for the risk of infinate loss that they have taken on your short position.
The reason that you are not paid interest on the credit balance resulting from the short is because your broker has to borrow the stock that you short. This also seems reasonable. (Though, I am sure, in many cases, they borrow it from another Datek customer, and there is no cost to borrow it.)
You are correct about what happens if the stock you shorted goes down:
"If the security which you sold short depreciates in market price, the debit balance is correspondingly reduced by the decrease in value".
And, of course, if the debit balance is reduced, that means that you will NOT pay interest on that portion and, if that leaves cash in your account, you will collect interest on that cash.
Everybody - please, please READ the stuff that Datek sends you when you open your account. And IF you have evidence that what they are doing is NOT the same as what it says in the disclosure statement, then complain to the SEC, NASDR, and sue the hell out of em'.
But, while I think that Datek is sometimes a bit sloppy, I just don't think they are that stupid to do what some are suggesting (charging interest on the price of shorted stock, in conflict with their disclosure statement) on purpose. |
