Best UK Brokers for Short Selling

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Contributor, Benzinga
November 29, 2023

Traditionally, investors buy assets that have the potential to appreciate so that they can sell and reap profits. Short selling or shorting takes an opposite approach — it bets against the stock market. Shorting is when you borrow a stock from a broker and immediately sell it at the current price. You then hope the stock's price will decline so you can buy back at a lower price and return the stock you owe your broker while keeping the price difference.  If you want to trade in the UK, you need the best UK brokers for short selling.

Suppose you borrow a unit of ABC company's stock at a hypothetical current market price of $10 per share and sell immediately at that price. You now have $10 in your pocket but still owe your broker a unit of the stock. Assuming ABC shares decline by $6, you can buy one share at $6 and return it to your broker to cover your short position. That means you sold at $10 and bought back at $6, making a profit of $4. 

If you're a U.K.-based investor looking to try your hand in short selling, you'll need a broker that supports shorting — not all brokers do. The best U.K.-based broker for short selling offers a low fee structure, a user-friendly platform and other trading features and benefits to help you achieve desired results.

Benzinga reviews some of the best U.K. brokers for short selling, what they offer and how they make shorting assets easier for you.

Best UK Brokers for Short Selling

A short trader can only be as efficient as the brokerage used. Here is a look at some of the best U.K. brokers for shorting.

1. Best Overall Global Broker for Short Selling: TradeZero

Benzinga's pick for the best overall broker for short selling is TradeZero. The brokerage won Benzinga's global fintech award for the best brokerage for short selling twice — in 2020 and 2021, respectively. TradeZero is also considered the best global brokerage for short selling. Its multiple platforms mean newbies and expert traders can seamlessly leverage it to execute shorting regardless of device type or OS. 

The platforms include robust software platforms — ZeroPro, ZeroWeb, ZeroFree and the highly intuitive mobile app for on-the-go traders, ZeroMobile. These platforms are loaded with the best trading tools and make for excellent ease of use. These tools include a watchlist, portfolio and chart windows, alerts, hot keys, real-time market news and a locate feature. 

The locate tool is a masterpiece, allowing you to find stocks for shorting in real-time based on your preferences and sell back shares you no longer wish to have in your portfolio. Newbies can leverage resource-rich research materials, including training videos, to fill their knowledge gaps and master the investment process. To get started with TradeZero, you require an account minimum of $500. Commissions are not charged if you meet the order criteria. Otherwise, varying fees apply. The platform provides excellent round-the-clock customer service, and you can also trade options and IPOs.

Pros

  • Proprietary trading platforms make it easier for you to trade with confidence
  • You can study the short sales or techniques you prefer to use before investing

Cons

  • Some advanced traders may want more functionality from the platform

2. Best for Active and Global Traders: Interactive Brokers

Interactive Brokers is an excellent option for professional and active day traders looking to leverage their expert knowledge and extensive experience for more insightful trades. The platform provides access to cutting-edge tools to help U.K. investors trade various financial products in more than 150 global markets. These products include stocks, ETFs, trusts, bonds, funds, options and CFDs. Although you can short any of its tradable assets directly, short selling via CFDs remains the best approach.

The short stock availability tool, accessible via the tools link within the client portal, provides a list of shortable stocks searchable by symbol or CUSIP and their indicative borrow rates.

The web-based and mobile app platforms are highly functional and optimized for experienced traders. Nevertheless, newbies will also find it very easy to get around. The mobile app is clean and highly customizable, with robust charting capabilities, a watchlist and screeners. The IBot — an AI-powered digital assistant — offers you a hands-off approach to trading.  

Interactive Brokers is transparent about its pricing. Commission fees for short selling may vary depending on your chosen plan among the two tiers pricing plan — IBKR Lite and IBKR Pro. However, you must maintain net liquidating equity of at least $2,000 for your order to be accepted. Round-the-clock customer support is offered via live chat, phone and email from Monday to Friday.

Pros

  • IBKR allows you to educate yourself as you trade
  • You can use some of the other tools on the site to hedge against risk when short selling

Cons

  • IBKR has so many other tools that you may not feel like you need to short sell to diversify your portfolio

3. Best for Advanced Technology Tools: Cobra Trading

Cobra Trading is Benzinga's 2022 winner for the best online broker for short selling over $25,000. However, this broker stands out because of its assemblage of the best tech tools for investing, trading and short selling. These tools are prominent across its three professional platforms, including the DAS Trader Pro, Sterling Trader PRO and Cobra TraderPro. Each features hotkey capabilities, advanced charting, custom alerts and real-time news, which are vital for short selling.

The DAS Trader Pro is so named because it leverages DAS (direct access software) — the leading trading technology in the market. Its additional tools like advanced order types, multiple monitors and stop types and real-time account management make it an excellent solution for multi-instrument trading and portfolio management. The Sterling Trader Pro is highly customizable and features state-of-the-art tools for options and equity trading. 

Although each platform contains robust tools to facilitate short selling, the Cobra TraderPro stepped it up. Unlike the other two platforms, it includes a short locate monitor — a valuable tool for finding shorting opportunities. And like the Sterling Trader Pro, it features real-time Level 2 market data and a watchlist.

Active traders who trade in large volumes and short sells will find Cobra Trading ideal. However, its relatively high-end price means people with little to no account minimum can't access the platform. To open an account in the U.K., you need an initial minimum deposit of $30,000 and a minimum account balance of $25,000 for trading. The platform offers efficient and responsive customer service.

Pros

  • A pro account can help you manage a larger portfolio or client assets
  • The short locate monitor makes it easier to pinpoint assets that will work within your strategy

Cons

  • Cobra tends to be designed for traders with larger balances

4. Best for Momentum Traders: CenterPoint Securities

Designed for intermediate and advanced traders, CenterPoint Securities allows momentum traders, high-volume traders and short sellers to make the most of their portfolios. The platform has a massive shorting inventory, flexible order routing and discounts that make it more affordable to invest. If you’re a foreign applicant from the UK, simply complete CenterPoint’s online form to determine if you qualify.

Pros

  • The platform is designed for advanced professionals with specific strategies
  • Order routing and discounts help you get the best pricing on each asset

Cons

  • Not all foreign applicants will qualify for an account

5. Best for Social Trading: eToro

  • eToro Stocks
    Best For:
    Social Investing
    securely through eToro Stocks's website

    eToros securities trading offered by eToro Securities, Inc, (“the BD”), member of FINRA and SIPC. Investing involves risk.

eToro is a multinational brokerage entity famous for its copy trading and investment service offering, with over 25 million users globally. The broker was among the pioneers of social copy trading. This service allows novice users to automatically copy the investment strategy of successful traders on the platform. The platform delivers top-notch brokerage services across boards to match every trader's skills.

eToro offers an extensive selection of investment options, including stocks, ETFs, cryptocurrencies, commodities, indices and CFDs. However, a CFD is the way to go for short selling purposes since you can use it to quickly and easily open a short position on a broad array of tradable assets in eToro. Key features include real-time alerts, customizable stop losses, modest charts and innovative CopyTrader. You can also trade in fractional shares with as little as $50 via CFDs.

eToro's web-based and mobile trading platforms are clean, highly functional and easy to navigate. However, there's no desktop version. While there's no commission, other fees apply for CFDs depending on the specific assets. eToro offers dedicated and round-the-clock customer support Monday to Friday.

Pros

  • You can use several tools to trade more effectively
  • The short selling inventory on this site is very competitive

Cons

  • Because eToro is such a massive platform, some traders might feel there are too many options that could lead to a paralysis-by-choices

6. Best for Freemuim Services: Trading 212

With over 1.5 million clients and 3 billion GBP in client assets, Trading 212 is a force to reckon with among global online financial trading platforms. While the broker grants you access to international stocks and exchange-traded funds (ETFs), it is more renowned globally for contracts for difference (CFDs) and forex trading. Trading 212 adopts a freemium business model, allowing users to access the platform's basic features for free. However, accessing the sophisticated features and trading CFDs comes with a fee. 

To short-sell on this platform, you must open a CFD account. The account grants you access to thousands of stocks, including Tesla, AMC and the infamous GameStop. Salient features of this account include zero commissions, no hidden fees, tight spreads and negative balance protection. 

However, you need a minimum CFD deposit of 10 GBP. A currency conversion charge of 0.5% may also apply. The platform also offers fractional shares. This allows you to start trading with as little as 1GBP in over 3,000 stocks and ETFs at zero commission. But fees may apply for trades in currencies other than the account base currency.

There's an in-house web-based platform that is highly customizable and navigable and a clean mobile platform with an excellent user interface. These features make it easy to use by both novices and professionals. With just a tap, you can invest in your favorite companies and set up your portfolio. The platform has an excellent rating on Trustpilot and offers round-the-clock customer support. 

Pros

  • There’s a diverse range of assets available
  • Fractional investing is available for those on a budget

Cons

  • Extra charges may seem excessive for some traders

Why Should You Short Sell?

Despite being a high-risk investment strategy, short selling has its benefits. For instance, shorting can provide a hedge in your long-only portfolio. You have the potential to make money regardless of the market's direction by leveraging short selling to counter your long positions as long as you use the best UK brokers for short selling.

Short selling can also help diversify your portfolio since you can short a broad array of assets, especially via CFD. A diversified portfolio offers profit potential and can be more insulated from market risk. Most importantly, you could rake in huge dollars if you successfully sell your borrowed assets and close your position before an upswing. Generally, price decreases are typically more significant and rapid than price increases. However, shorting stocks presents a far greater risk than buying long.

The core argument against shorting is the potential for an unlimited loss. When you are long an asset, your risk level is limited to $0 on the downside boundary. An asset price cannot fall below $0, so you can only lose all your investment capital. In contrast, there's no upper limit to a price upswing.

So when you short an asset, the price can rise indefinitely, triggering a short squeeze. And you can lose far more than you invested. As a tip for short selling, consider the stock of a company with obsolete business models, poor management and decision-making team and poor financial strength bothering on bankruptcy.

What to Look for in an Online Broker

When shopping for an online broker, you should consider the following. 

Low commissions: Brokers charge you a commission for using their services. You should consider brokerages with little or no commission because high commissions can eat up your profits. 

Low account minimum: The account minimum is the lowest balance you must have in your brokerage account for trade orders to be executed. While a few brokers may require no minimum, there are still a lot of excellent brokerages that require a minimum. Look out for brokers with moderate to zero minimum so you won't struggle with core investment capital.

Diverse platforms and investment assets: Brokers that offer software, web-based and mobile trading platforms make for flexibility and are worth considering. Such brokers also provide a broad array of tradable or investment assets.

Trading, research and educational tools: The more trading, research and education tools you can access, the more accurate and informed trading decisions. So consider brokers offering requisite tools.

How to Make the Most of the Best UK Brokers for Short Selling

Maximizing your broker's service offerings can help you achieve your investment goals faster. Here’s how to make the most of your online broker

Choose an online broker that best suits your needs: Suppose shorting is your core investment strategy. In that case, you must go for a broker that fully supports short selling and the investment asset that aligns with it to get the best of such a platform.

Take advantage of promotions: Online brokers often offer promotions to attract new customers or retain older ones. One excellent way to maximize the services of your online broker is by taking advantage of such promotions. 

Leverage research and educational materials available: Besides offering trading tools, most brokers provide extensive educational and research material on investing. Leveraging such resources can help you develop an investment strategy that works for you, which is vital in realizing your investment goals.

Frequently Asked Questions

Q

Can you short sell in the U.K.?

A

Yes, short-selling shares is legal in the U.K.

Q

Do you need a broker to short sell a stock?

A

Yes, you’ll need a broker to lend you the necessary shares to short sell.

Q

Where do I find the best UK brokers for short selling?

A

You can find the best UK brokers for short selling on Benzinga’s list above.