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Does anyone have a link to a good explanation of how 140% of the float can be shorted, given the restrictions that the SEC imposed on naked shorting in 2008? Is
by AlanYx 6y ago
Does anyone have a link to a good explanation of how 140% of the float can be shorted, given the restrictions that the SEC imposed on naked shorting in 2008? Is there a specific loophole that is being consistently exploited?
- ohgodplsno 6y agoNo loophole, simply that the SEC does not exist or matter if you're a hedge fund.
- gruez 6y agoFrom Matt Levine: >There are 100 shares. A owns 90 of them, B owns 10. A lends her 90 shares to C, who shorts them all to D. Now A owns 90 shares, B owns 10 and D owns 90—there are 100 shares outstanding, but190 shares show up on ownership lists. (The accounts balance because C owes 90 shares to A, giving C, in a sense, negative 90 shares.) Short interest is 90 shares out of 100 outstanding. Now D lends her 90 shares to E, who shorts them all to F. Now A owns 90, B 10, D 90 and F 90, for a total of 280 shares. Short interest is 180 shares out of 100 outstanding. No problem! No big deal! You can just keep re-borrowing the shares. F can lend them to G! It's fine.
- Vespasian 6y agoIs ownership recorded like this in reality or does A transfers her shares to C and gets an IOU (secured by the margin) in return? Then ownership records would not exceed the number of outstanding shares