DEGIRO’s Debit Securities service allows clients to short sell. This service is available for our Active, Trader and Day Trader profile types. Before making use of Debit Securities, we want to ensure that you understand what it entails and the risks involved.
Debit Securities is our service that facilitates the possibility of short selling cash market securities, such as shares and ETFs. This means that you can sell a security that you do not own and, therefore, borrow from another investor with a long position in the same security. Investors may short sell to speculate on a price decrease in the underlying security by trying to buy the security back at a lower price than it was sold for. It can also be used for hedging purposes. At DEGIRO, it is not possible to short products on American, Canadian, Asian or Australian exchanges or products that are category D. Apart from these, there are other securities that are excluded from this service due to borrowing restrictions, for example.
Although this is not a cost, when entering into a short position, margin needs to be deposited in your account. With a short position, you receive the money from the transaction. For example, if you short ten shares of ING worth €100, this €100 will appear on your account and in your portfolio, you will see a position of ING with -10 in the quantity column. Margin is required to cover the risk that you will not have enough funds to buy back these securities. The amount of margin required is based on the risk category and value of the product. More information about margin requirements can be found here.
Aside from margin, when entering into a short position, you will have to pay transaction costs. DEGIRO charges to both buy and sell. Details can be found on our Fee Schedule. In addition to transaction costs, there are short stock fees. The short stock fees depend on the risk category of the product. Details of this can also be found on our Fee Schedule.
While short selling can be rewarding, it also comes with risk. Since the price of the underlying security can theoretically increase without limits, the loss on the short position can also be unlimited.
As share prices are constantly fluctuating, it is possible that limits may be breached resulting in a margin call. In this case, you will be notified by DEGIRO to solve the deficit before a given deadline by either transferring funds or closing positions. If the margin call is not resolved before the given deadline, DEGIRO will intervene.
In addition, DEGIRO has the right to request a buyback of the relevant shares to close your short position at any given time. In the event that you do not close the short position by the given deadline, DEGIRO can buy back the shares on your behalf. More information about this can be found in the document Debit Securities Conditions.
The information in this article is not written for advisory purposes, nor does it intend to recommend any investments. Investing involves risks. You can lose (a part of) your deposit. We advise you to only invest in financial products that match your knowledge and experience.