REBATE

Used in the context of general equities. Negotiated return of a portion of the interest earned by the lender of stock to a short seller. When a stock is sold short , the seller borrows stock from an owner or custodian and delivers it to the buyer. The proceeds are delivered to the lender. The borrower , who is short, often wants a rebate of the interest earned on the proceeds under the lender's control, especially when the stock can be borrowed from many sources. Note: the seller must pay the lender any dividends paid out or, in the case of bonds , interest which accrues daily during the course of the borrow.