Stock Loan Rebate

Good customers get preferential treatment. Free extras. Better seats. First dibs on special offers.

It happens on Wall Street, just as in every other facet of commerce. Take the stock loan rebate. It's a cash rebate offered in certain situations to high-level customers at a brokerage firm. However, the rebate only comes in a specific circumstance: it goes to customers who lend out stock for short sales.

A short sale is a technique used to take advantage of a falling stock price. The short seller borrows stock and sells it on the open market. Then they hope and pray the stock goes down. If it does, they're able to buy it back at a lower price and return it to the original owner, pocketing the profit they earned in the transaction.

Brokers will sometimes pay a stock loan rebate to good clients who loan out their shares for short sellers. This kickback often comes up when margin is involved.