Equity trading account margin loan rate improvement

2020

A client had a large margin account used to invest and trade public equities. The client was an active trader in some names, as well as well as holding certain positions for many years. The client used significant leverage to borrow against the long-term holdings and add exposure to shorter-term trades.

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This profile required a margin loan of over $120M.

The custodian maintained a margin rate that had not been appropriately adjusted based on the Fed’s recent lowering of interest rates. Upon explaining our desire for an adjustment, the custodian did not comply.

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Our team ran a competitive process between multiple banks to negotiate the lowest rate possible. The result was that the current bank responded by issuing a downward adjustment in the rate by 60bp, an annual savings of over $720,000 per year.