Anavex Life Sciences Corp (AVXL)

[wildcard235]

Interactive Brokers sets the short-lending interest rates based on supply vs. demand for each stock, but they do not publish their formula or methodology. IB splits the interest revenue 50-50, keeping half and sending half to the account that lends the shares (or to the brokerage that represents the account, if it is not an IB account), so IB profits from short-lending.

What prevents them from setting the interest rate arbitrarily high is demand. If they set it way too high for the current level of demand, no one will borrow the shares, and 50% of nothing is nothing. If they set the rates a little too high, they will get some short-selling, but not as much as they would with a lower rate. Therefore, they try to set the interest rate at a level that balances both supply and demand, and provides the largest possible profit.

The only value I know of in watching this SLB rate is when it skyrockets in a relatively short period of time, which appears to indicate a large increase in short-selling. The next-best indicator I know of for shorting is the reporting of the actual quantities of shares sold short, but that is only reported twice per month, and with a reporting lag time of about 2 weeks, making it very untimely.

I agree with you that the rate is currently about as low as it has ever been for AVXL since the uplisting to NASDAQ.