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Securities Financing at

Interactive Brokers

Bruce Turner, Interactive Brokersbturner@interactivebrokers.com

December 2013

Member SIPC www.sipc.org

webinars@interactivebrokers.com www.ibkr.com/webinars

Table of Contents• Introduction• Trade Date – Executing the Short Sale

– Availability• Short Stock Availability Tool• Rate Conventions• Stock Locate Availability in TWS

– How locates works at IB• Large extended interconnected network• Entering orders drives locate consumption

– Pre-Borrow – How it works – Customer Experience• Settlement Date and Beyond – Fulfilling Your Trading Strategy

– Sourcing Supply– Deriving Rates– Duration

• Loaning Shares– Stock Yield Enhancement Program– AQS

• Getting Your Questions Answered• What’s New

– Locate Notifications– Publishing Analytics to IB Trader’s Insight– Revamped Web Page

• What’s Coming Soon– IRA Stock Yield Enhancement Eligibility

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Trade DateExecuting the Short Sale

• Availability– Short Stock Availability Tool

– Rate Conventions

– Stock Locate Availability in TWS

• How Locates Work at IB– Large extended interconnected network

– Entering orders drives locate consumption

• Pre-Borrow –– How it works

– Customer Experience

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Trade Date – Short Stock Availability Tool

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Trade Date - Stock Availability in TWS

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Trade Date - How Locates Work at IB

• Locates are made available for all customers

• Securing a locate is done at order entry.

– Different than other brokers

• IB is connected to over 60 counterparties in the USA including Agent Lenders and Brokers to source supply

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Trade Date – Pre-Borrows

• Pre-Borrows –

– Allows customer to secure Hard to Borrow shares in advance of settlement date to mitigate close out risk

– Pre-Borrows at IB are also put last in line for potential buy ins

– Pre-Borrows on Hard to Borrows can involve manual desk locate and borrow and are subject to delivery from counterparty.

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Settlement Date and Beyond

• Sourcing Supply

• Deriving Rates

• Duration

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Settlement Date and Beyond –Supply and Deriving Rates

• Sourcing Borrow Supply

– Source externally what we need beyond what is covered internally

– Connected to 60+ Brokers and Agent Lenders

– Reducing Rule 204 Closeouts and Buy In’s

• System Generated Rate Recommendations

– Based on several data sources

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Settlement Date and Beyond –Duration

• Using the rate and supply data we seek to keep existing borrows on at the optimal rate.

• Our goal is to keep loans for as long as the customer strategy requires.

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Loaning Shares - Stock Yield Enhancement Program(SYEP)

• Why enroll for SYEP?– Generate Revenue from existing portfolio positions– Pension Funds and Beneficial Owners are currently lending

• Who Can Enroll– iBrokers – Non-Disclosed and Disclosed– RIA’s– Individuals– Hedge Funds– 50k USD Minimum Account Balance

• What You Should Expect– Hard to Borrow loans are most valuable

• How Rates are Determined– Rates are the Weighted Average of all the outstanding loans on IB’s books

The customer and IB are getting the same gross rate.

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Loaning Shares - AQS• IB sponsors enabled customers to transact settled borrows and loans

directly on AQS, the only electronic stock loan market place.

• The Options Clearing Corporation acts as the Central Credit Counterparty

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Getting Your Questions AnsweredInteracting with IB

• Access the Securities Finance desk through the Customer Service Desk

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What’s New

• Borrow Notification in IBFYI

• Publishing Securities Finance Analytics Weekly on Trader Insight

• Revamped Securities Financing Web Page

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What’s NewBorrow Notification in IBFYI

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What’s New - Analytics

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What’s New - AnalyticsTop 5 Shorted Securities Per Sector (as of 12/17/13)

Symbol Description Sector

IAG IAMGOLD CORPORATION Basic Materials

MTL MECHEL-SPONSORED ADR Basic Materials

GG GOLDCORP INC Basic Materials

SSLT SESA STERLITE LTD-ADR Basic Materials

ABX BARRICK GOLD CORP Basic Materials

Top 5 Shorted Securities Per Sector (as of 12/17/13)

Symbol Description Sector

FB FACEBOOK INC-A Communications

TWTR TWITTER INC Communications

LEAP LEAP WIRELESS INTL INC Communications

QIHU QIHOO 360 TECHNOLOGY CO-ADR Communications

ZU ZULILY INC - CL A Communications

Top 5 Shorted Securities Per Sector (as of 12/17/13)

Symbol Description Sector

MGM MGM RESORTS INTERNATIONAL Consumer, Cyclical

NNRX NUTRANOMICS INC Consumer, Cyclical

DHI DR HORTON INC Consumer, Cyclical

PHOT GROWLIFE INC Consumer, Cyclical

IRBT IROBOT CORP Consumer, Cyclical

Top 5 Shorted Securities Per Sector (as of 12/17/13)

Symbol Description Sector

ONVO ORGANOVO HOLDINGS INC Consumer, Non-cyclical

SLTM SOLTA MEDICAL INC Consumer, Non-cyclical

RMTI ROCKWELL MEDICAL INC Consumer, Non-cyclical

CYTR CYTRX CORP Consumer, Non-cyclical

SFXE SFX ENTERTAINMENT INC Consumer, Non-cyclical

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Symbol Description

IAG IAMGOLD CORPORATION

ONVO ORGANOVO HOLDINGS INC

MGM MGM RESORTS INTERNATIONAL

FB FACEBOOK INC-A

KKR KKR & CO LP

SLTM SOLTA MEDICAL INC

TWTR TWITTER INC

FST FOREST OIL CORP

RMTI ROCKWELL MEDICAL INC

NNRX NUTRANOMICS INC

LLEN L&L ENERGY INC

HIMX HIMAX TECHNOLOGIES INC-ADR

DHI DR HORTON INC

SCTY SOLARCITY CORP

PHOT GROWLIFE INC

15 Most Shorted Securties (as of 12/17/13)

What’s New - Analytics15 Most Difficult To Source Locates (week of 12/09/13-

12/13/13)

Symbol Description

CYTR CYTRX CORP

MDDD MAKISM 3D CORP

TGRO TIGER OIL AND ENERGY INC

BGMD BG MEDICINE INC

TWTR TWITTER INC

NNRX NUTRANOMICS INC

VEND FRESH HEALTHY VENDING INTERN

TSLA TESLA MOTORS INC

GFOX GRAY FOX PETROLEUM CORP

BISN BISON PETROLEUM CORP

PLUG PLUG POWER INC

NURO NEUROMETRIX INC

SRPT SAREPTA THERAPEUTICS INC

AXIH AXION INTERNATIONAL HOLDINGS

MAV PIONEER MUNI HI INC ADV TRST

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Top 5 Most Difficult To Source Locates Per Sector (week of 12/09/13-12/13/13)

Symbol Description Sector

DNAP DNA PRECIOUS METALS INC Basic Materials

NCQ NOVACOPPER INC Basic Materials

URRE URANIUM RESOURCES INC Basic Materials

URZ URANERZ ENERGY CORP Basic Materials

USU USEC INC Basic Materials

Top 5 Most Difficult To Source Locates Per Sector (week of 12/09/13-12/13/13)

Symbol Description Sector

TWTR TWITTER INC Communications

ATHM AUTOHOME INC Communications

VISN VISIONCHINA MEDIA INC-ADR Communications

GOGO GOGO INC Communications

ENGA ENGAGE MOBILITY INC Communications

Top 5 Most Difficult To Source Locates Per Sector (week of 12/09/13-12/13/13)

Symbol Description Sector

NNRX NUTRANOMICS INC Consumer, Cyclical

VEND FRESH HEALTHY VENDING INTERN Consumer, Cyclical

TSLA TESLA MOTORS INC Consumer, Cyclical

GRLT GRILLIT INC Consumer, Cyclical

HLT HILTON WORLDWIDE HOLDINGS IN Consumer, Cyclical

Top 5 Most Difficult To Source Locates Per Sector (week of 12/09/13-12/13/13)

Symbol Description Sector

CYTR CYTRX CORP Consumer, Non-cyclical

MDDD MAKISM 3D CORP Consumer, Non-cyclical

BGMD BG MEDICINE INC Consumer, Non-cyclical

NURO NEUROMETRIX INC Consumer, Non-cyclical

SRPT SAREPTA THERAPEUTICS INC Consumer, Non-cyclical

What’s New - Analytics

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15 Most Difficult To Source ETFs Locates (week of

12/09/13-12/13/13)

Symbol Description

UVXY PROSHARES ULTRA VIX ST FUTUR

DUST DIREXION GOLD MINERS BEAR 3X

TLT ISHARES 20+ YEAR TREASURY BO

DSLV VELOCITYSHARES 3X INVERSE SI

EDZ DIREXION DLY EMG MKT BEAR 3X

XIV VELOCITYSHARES INV VIX SH-TM

VONG VANGUARD RUSSELL 1000 GROWTH

QABA FIRST TRUST NASDAQ ABA CBIF

PSCU POWERSHARES S&P SC UTILITIES

PSCI POWERSHARES S&P SC INDUSTRIA

KCE SPDR S&P CAPITAL MARKETS ETF

TDIV FT NASDAQ TECH DVD INDEX FD

SEF PROSHARES SHORT FINANCIALS

TVIX VELOCITYSHARES 2X VIX SH-TRM

UCO PROSHRE ULT DJ-UBS CRUDE OIL

15 Most Shorted ETFs (as of 12/17/13)

Symbol Description

VXX IPATH S&P 500 VIX S/T FU ETN

QQQ POWERSHARES QQQ NASDAQ 100

GDX MARKET VECTORS GOLD MINERS

SPY SPDR S&P 500 ETF TRUST

UVXY PROSHARES ULTRA VIX ST FUTUR

EEM ISHARES MSCI EMERGING MARKET

VWO VANGUARD FTSE EMERGING MARKE

XIV VELOCITYSHARES INV VIX SH-TM

SKF PROSHARES ULTSHRT FINANCIALS

GDXJ MARKET VECTORS JR GOLD MINER

XLI INDUSTRIAL SELECT SECT SPDR

XLF FINANCIAL SELECT SECTOR SPDR

SH PROSHARES SHORT S&P500

JNK SPDR BARCLAYS HIGH YIELD BD

XLE ENERGY SELECT SECTOR SPDR

What’s New – Revamped Web Page

https://www.interactivebrokers.com/en/index.php?f=shortableStocks&p=overview

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What’s Coming Soon

• IRA Enrollment in SYEP

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Trade Date to Settlement Date and Beyond

• IB’s tools and Customer Service are focused on enabling your trading strategies

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Disclosures

Options involve risk and are not suitable for all investors. For information on the uses and risks of options, you can obtain a copy of the Options Clearing Corporation risk disclosure document titled Characteristics and Risks of Standardized Options by visiting Interactivebrokers.com.

Futures are not suitable for all investors. The amount you may lose may be greater than your initial investment. Before trading futures, please read the CFTC Risk Disclosure. For a copy visit interactivebrokers.com.

Security futures involve a high degree of risk and are not suitable for all investors. The amount you may lose may be greater than your initial investment. Before trading security futures, please read the Security Futures Risk Disclosure Statement. For a copy visit Interactivebrokers.com.

There is a substantial risk of loss in foreign exchange trading. The settlement date of foreign exchange trades can vary due to time zone differences and bank holidays. When trading across foreign exchange markets, this may necessitate borrowing funds to settleforeign exchange trades. The interest rate on borrowed funds must be considered when computing the cost of trades across multiple markets.

The Order types available through Interactive Brokers LLC’s Trader Workstation are designed to help you limit your loss and/or lock in a profit. Market conditions and other factors may affect execution. In general, orders guarantee a fill or guarantee a price, but not both. In extreme market conditions, an order may either be executed at a different price than anticipated or may not be filled in the marketplace.

There is a substantial risk of loss in trading futures and options. Past performance is not indicative of future results.

Any stock, options or futures symbols displayed are for illustrative purposes only and are not intended to portray recommendations.

Interactive Brokers LLC is a member of NYSE FINRA SIPC

Interactive Brokers LLC is registered with HKSFC and is a participant of the Sydney Futures Exchange (SFE)

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