What are fees to borrow?Fees to borrow are the daily fees borrowers pay agent lenders to borrow a security, denoted in bps. Typically, though not always, higher fees mean a security is more in demand from a securities lending perspective. Fees to borrow are loosely grouped into three categories (which are somewhat subjective and vary by institution):
1. General collateral, aka “GC,” which trades from 0 to 25 bps.
2. Warm, which trades from 26 to 300 bps.
3. Hot, which trades at more than 300 bps.
Fees to borrow depend greatly on the availability of shares to borrow in the marketplace and prevailing market conditions (e.g., earnings, news, etc).