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Securities Borrowing and Lending


Short selling is a strategy that allows investors to gain from the decline in price of a security. Typically, short-sellers "borrow" the securities to be sold, and later repurchase identical securities for return to the lender. If the security price falls as expected, the investor profits from the deal.

However, according to the Securities and Futures Ordinance of Hong Kong, investors are prohibited to naked short sell any securities if they do not possess the security or believe that they will have a loan of the security at the time of sale.

To enhance your opportunity to make potential profits even from a declining market, Taifook provides Stock Borrowing and Lending service. You can now enjoy the flexibility of borrowing, short selling, and repurchasing securities via our multi-channel trading platforms conveniently and effortlessly.


Please call our Customer Service hotline at (852) 3583 3388 to obtain more information on our Securities Borrowing and Lending service.


What does Taifook Offer?

Stock Borrowing

You can borrow stocks from Taifook by placing instructions either by phone or in writing. The transaction will take place upon confirmation of the stock’s availability for short selling and your acceptance on our stock-borrowing offer.

Short Selling

You can call us anytime to short-sell with adequate deposit ready in the SBL account on T-day (i.e. transaction day).

Stock Returning

You can either repurchase the stocks via our Sales team or online trading channels, or transfer the respective stocks from another custodian or brokerage firm. A clear instruction that the transaction is for stock returning purpose is required. On T+2 day, money will be transferred into your account while the borrowed stocks will be returned to complete the deal.

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Example

Assume shares of Company X are currently selling for $10/share. Predicting that it will trade lower in coming days, an investor can borrow 1,000 shares of Company X from Taifook, and immediately sell those shares for $10,000 ($10 x 1,000shares). If the share price later falls to $8/share, the investor can buy back 1,000 shares for $8,000 in the market and return them to the original owner while making a $2,000 profit (less any interest incurred and service charges).

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Short Selling vs. Margin Financing

  Short Selling Margin Financing
Market Expectation Bearish Bullish
Borrow Stock Money
Gain / Loss Stock Price Fall / Rise Spread Stock Price Rise / Fall Spread

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Fees and Charges

IRD Registration Fee HK$270 (One time)
Interest Charge Calculated based on the borrowed value and annual interest rate, subject to change
Handling Fee Minimum of HK$3,000. Waived if total interest charge incurred exceeds this amount

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Frequently Asked Questions


  1. What is the key advantage of using SBL facilities as opposed to other short selling facilities?
  2. What is the minimum maintenance margin requirement for SBL?
  3. How to compute the amount of collaterals required for a SBL transaction?
  4. What happens if the securities that I have sold short initiate corporate actions such as dividend distribution, bonus issue or rights issue?
  5. What should I do if I wish to return the securities after a buy-back?
  6. What happens in the event of a recall of the borrowed securities?
  7. Can I withdraw the borrowed securities from my account?


  1. What is the key advantage of using SBL facilities as opposed to other short selling facilities?

    You can short sell/buy back the securities in the market during the Continuous Trading session just like you do for a normal securities security buy/sell trade. This is not an over-the-counter product where you trade against market makers.


  2. What is the minimum maintenance margin requirement for SBL?

    The minimum maintenance margin requirement is 120% of the market value of the borrowed securities in the form of cash. Margin deposit should be maintained in the account during the Loan Tenure.


  3. How to compute the amount of collaterals required for a SBL transaction?

    Initial Margin = 20% of market value of the borrowed securities
    Maintenance Margin = 120% of market value of the borrowed securities – (sales proceeds received or receivable + existing collaterals)


  4. What happens if the securities that I have sold short initiate corporate actions such as dividend distribution, bonus issue or rights issue?

    Earnings generated from corporate actions of a security, in principle, belong to the lender. Even if the borrower has already sold the respective security in the market without profiting from such event, he/she is still responsible for imbursement of such income to the lender.


  5. What should I do if I wish to return the securities after a buy-back?

    A buy-back does not automatically translate into a return of securities. You are required to inform us to arrange for a return after a buy-back. Interest accumulated up to the day of the return will be deducted from your account.


  6. What happens in the event of a recall of the borrowed securities?

    If you receive a notice of recall, you will have to return the borrowed securities within the same day. That means you will have to buy back the required securities from the market if you have an open short position.


  7. Can I withdraw the borrowed securities from my account?

    No. Borrowed securities must be retained in the account to satisfy the maintenance margin requirement.


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    Note: No information published on the website constitutes a solicitation or an offer to buy or sell any investment products. Investment involves risk. You should carefully consider whether any investment products or services mentioned herein are appropriate for you in view of your investment experience, objectives, financial resources and relevant circumstances. The price of investment products may move up or down. Losses may be incurred as well as profits made as a result of buying and selling investment products. The above services are provided by Taifook Securities Company Limited.

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