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This is mostly nonsense. There is nothing wrong with there being more shares short than shares outstanding. It just seems problematic, until you think it throug

by darawk 6y ago

This is mostly nonsense. There is nothing wrong with there being more shares short than shares outstanding. It just seems problematic, until you think it through. Person A has 1 share of company Y. Person B borrows 1 share of company Y from person A, and then sells it into the market. This is called a short sale. But person B just sold their borrowed share. Now that share is owned by person C. Person C can now lend it back out to person D, or to person B again, and the process can repeat infinitely. The idea that short interest is constrained by shares outstanding is just a fundamental misunderstanding of how the short market works. Shorting behaves the same way that fractional reserve banking does, and there is a 'money multiplier' like leverage effect in the process. There is nothing nefarious about this, and it certainly isn't 'countfeiting'. Short sellers provide an important service to capital markets, maybe the most important service: they help to identify mismanaged or fraudulent companies. The idea that attacking short sellers is attacking wall street is completely backwards. Most of Wall Street hates short sellers, because they drive down the prices of companies and confidence in markets (in the short run, in the long run, they increase it).

oldgradstudent 6y ago
> Shorting behaves the same way that fractional reserve banking does Yes. Except that the fractional reserve banking system has a lender of last resort.
- eru 6y ago
  Some fractional reserve banking systems do. Historically, systems without lender of last resort have done quite well. See eg the Canadian system of the 19th century, with no lender of last resort, and that often ended up as an emergency lender to the mis-regulated and crisis-prone American system to the south.
- sidibe 6y ago
  And the whole "fractional" word. You can't lend someone 10 shares based on the one you bought.
  - kgwgk 6y ago
    In fact the "fractional" part goes the other way. You can lend the whole share you bought. But the bank cannot lend the whole dollar you deposited, they have to keep a fraction of it as reserve.
    - sidibe 6y ago
      You and I can lend each other all of our money. The bank can lend more than they have.
      - Chris2048 6y ago
        Not really. You. nor the bank, can't lend more money that you have, but you can promise more than you have. That automatically implies something more complicated than lending. At the very least, money was borrowed (on a promise) from a third party in order to provide the money they loaned. You and I can do the same, I can promise you whatever I like. And if I manage to convince you, or a third party, that my promise is good, I can even borrow money from them. And loan out that money, despite not owing it; Unless there is something fraudulent in doing that wrt my agreements with the borrower - but the bank has the same, nationally regulated, restrictions too.
      - kgwgk 6y ago
        If a bank is created and you deposit $1, the bank has $1. They can lend only $0.9 because they need to keep $0.1 as reserve (for example). From there different things could happen: a) if the borrower takes the $0.9 and takes it elsewhere the bank cannot lend a single additional cent until they get more deposits. The fractional reserve means they could only lend a fraction of the dollar. Maybe the money will be deposited in another bank who will then lend to someone else, but for the original bank who got $1 it stops there. b) if that money remains in the bank as a new deposit, they have now $1.9 in deposits. They can lend a fraction of the additional $0.90, and make an additional loan of $0.81 (keeping $0.19 in reserves in total). If the second loan also ends in the bank as a deposit they will have $2.71 in deposits, they can make a new loan etc. but the multiplier is limited. For shares there is no limit at all. If Alice has a share she can lend it to Bob who sells it to Carol. Carol can lend it to Daniel who sells it to Elaine. Elaine can lend it to Felix who sells it to Gloria. Gloria can lend it to Hector who sells it to Ingrid. They can go on for as long as they want and all the ladies will be long one share.
- jameshart 6y ago
  So does the stock market: a company can always issue more stock. And a market can allow naked short sales to provide liquidity.
stupidcar 6y ago
What your describing still sounds incredibly dodgy. The price of anything is a result of its some intrinsic value and the volume of supply. So a precious stone is valuable because of its beauty, but also because it's rare. If someone mines a billion such stones, it won't affect their individual beauty, but it will certainly reduce the price someone is willing to pay for one. Now, you seem to be saying that short selling is a signal about intrinsic value, but the process you describe, whether you want to call it counterfeit shares or fractional reserve shareholding or whatever also messes with the valuation by inflating the supply. If there are more shares of a given company available, those individual shares will be worth less. The result would seem to be that naked short selling at volume will create a self-fulfilling prophecy. You can drive the price down simply by inflating the supply, regardless of whether the company is well managed or not. Maybe you start with badly-managed companies, but there's always going to be a perverse incentive to target any company so long as you can manipulate the supply enough to force a price drop. If you care about the market as a measure of company health, that doesn't sound like a good idea.
- JumpCrisscross 6y ago
  > naked short selling at volume will create a self-fulfilling prophecy To be super clear, naked short selling is banned for everyone but market makers [1]. A market maker goes naked short when there is a buying frenzy. Their economic incentive is to then cover the short given they are in a buying frenzy. The NYSE explicitly markets its specialist system to issuers as a stabiliser mechanism. It’s a selling point to long-term investors and Boards. The only people who get upset about this are hedge funds and day traders who get ahead of their skis. [1] By Wall Street tradition, every long losing money must allege naked shorting. That doesn’t substitute for evidence of it. Large amounts of short interest do not indicate naked shorting. (Lots of FTDs do, but this figure has to be scaled to leverage and volatility.)
  - eru 6y ago
    Though arguably, naked short selling should be allowed as well. (With certain safe guards and sufficient margin requirements.) After all, we allow something similar to naked short selling when people write options or trade futures. And those markets work just fine.
hagy 6y ago
When person A lends their share to person B, they no longer own a share, they own the right to receive a share from person B sometime in the future, interest payments on the lending, and collateral to ensure the borrower can make good on their obligations. This website seems to mainly be talking about naked short selling, which is selling a stock without first owning or borrowing it. This not necessarily illegal, although can be under some conditions, including aggressive short selling. Wikipedia has a fair amount of info on the practice, https://en.wikipedia.org/wiki/Naked_short_selling https://en.wikipedia.org/wiki/Naked_short_selling The practice of a selling a share that one does not own is supposed to be used by market neutral market makers to ensure their is always liquidity. They must then at some point in the future buy a share from the market to replace the phantom (i.e., counterfeit) share that they sold. This practice is useful when there are suddenly more buyers than sellers and the market maker exhausts their standard supply of shares. Otherwise there may not be any bids on the stock at any price for sometime. Other argue that this is no longer necessary with many participants beyond market makers that also employ algo trading and can quickly adjust to increasing demand. Further, if lack of supply becomes a regular occurrence, investors may start regularly setting high, possibly even ridiculously high, standing sell limit orders such that there will always be bids at some price points.
- varispeed 6y ago
  Isn't selling something you don't own a fraud or the stock market has an exemption? The instance when A essentially sells the share to B accepting the right to receive the share back as a payment also wouldn't fly in any other environment, as this could just open the door to money laundering. So why is this accepted in the stock market? Or simply the law enforcement doesn't know how to tackle it?
  - dcolkitt 6y ago
    > Isn't selling something you don't own a fraud or the stock market has an exemption? I call up Dominos and order a pepperoni pizza. They take my order and process my credit card. They’ve just sold me a pizza that doesn’t exist. Is this fraud?
matwood 6y ago
> This is mostly nonsense. Agreed. People should be able to take the pessimistic side of a trade. The one problem I could see with short selling is not the technical act of selling short, but the (dis)information campaign around a company that appears to follow. But, this happens both ways good and bad so it's probably a wash. > Most of Wall Street hates short sellers, because they drive down the prices of companies and confidence in markets There's also an emotional dislike of the person who wins when you lose. Short sellers are like the person playing 'don't pass' in craps.
- wpietri 6y ago
  > this happens both ways good and bad so it's probably a wash. Absolutely. A real problem in things that aren't publicly traded on open markets is hype asymmetry. Somebody who wants the share price to go up can put enormous amounts of time and money into creating the appearance that the stock is worth more than it is. But there's no corresponding incentive to puncture the hype. I suspect every one of us can name a privately held startup with a valuation we think is absurdly high. But there's no practical way to bet against them until they're publicly traded and we can short them or buy options (which may get hedged by buying or (short) selling stock).
- jml78 6y ago
  > But, this happens both ways good and bad so it's probably a wash. Only if you ignore reality. Huge hedge funds are called market movers for a reason. These hedge funds decide to short your company's stock and they have a direct impact on your stock value regardless of whether the hedge fund has any basis for actually shorting. Their "reason" can be 100% bullshit. Doesn't matter. They put a large short position on your company and it has an immediate direct impact. Not only that, like you said about disinformation, it also allows them to get other parts of the market to also jump on board. The way shorting works with hedge funds is that it is a self fulfilling prophecy a huge majority of the time And people talk about how capitalism has driven companies to only care about the next quarter. Everyone realizes this is overall a bad thing. Short sellers are one of the reasons you have to do that. I don't believe shorts have any intrinsic value they are actually bringing to the market. People choosing not to buy stock at existing prices does the same thing people claim shorting does. You don't need to borrow stock and sell it back making a profit to have a functioning trading system.
varispeed 6y ago
This is the problem - someone is selling something they don't own. It's like you borrowed a car from a rental company and then you sold it to someone. Pretty sure that's a crime. If this is allowed on the stock market, then I think this is laziness of law enforcement that they don't know what to do with it. What if the owner wants the item back and the person you sold it to won't sell it? It seems like this may be the problem with Gamestop. If people hold on to their shares, whoever "shorted" them is in a big trouble and rightfully so.
- goodluckchuck 6y ago
  Yep, just like fractional reserve banking, it demonstrates for a lot of people that there can be a “run” on a stock / brokerage / the entire market. Well, the FDIC insures up to 250k of bank accounts, but what happens when there’s a run on your 401k?
- cousin_it 6y ago
  You can think of shorting as betting that the stock will go down. For example, Alice can write on a piece of paper: "Anytime anyone wants to sell this paper back to me, I'll pay a sum equal to the price of GME at that moment". Now if Alice sells the paper to Bob, Alice is short and Bob is long, even though none of them touched any stock. Of course if many Alices do that, that will push down the price of GME, because it's market-relevant information that many people think GME will go down. The real problem is counterparty risk. What happens if Alice runs out of money and can't pay up, or there's a run on all Alices at once? So a system of guarantors is needed. But this is far from the simple argument that "selling a borrowed car is stealing".
  - varispeed 6y ago
    What this example has anything to do with selling something you don't own? It's like a thief would explain why he "borrowed" a car and then sold it and will promise it will get it back to the owner. Apparently stockmarket has an exemption for this behaviour, maybe they pay big sums to law enforcement to turn the blind eye.
beowulfey 6y ago
>Person A has 1 share of company Y. Person B borrows 1 share of company Y from person A, and then sells it into the market. This is called a short sale. But person B just sold their borrowed share. Now that share is owned by person C. What happens to Person A in this scenario?
- jameshart 6y ago
  At a later date, Person B returns a share to them. And B pays them for the privilege of borrowing the share in the first place. Person B thinks that it will cost less to buy that share in the future than the money they make from selling the share today, which is why they asked A to lend them the share in the first place. They plan to buy a cheaper share and give that back to A. A doesn’t care if they get back their original share, they just want to get a share back.
  - stonemetal12 6y ago
    So rather than borrowing it is more like renting?
- mklauber1 6y ago
  They get interest from Person B, and when the short contract is up, they can force Person B (or more accurately their broker who passes the price on) to buy a replacement stock, regardless of the price. Alternatively, they can attempt to open another short contract, paying more interest to have continue to borrow the stock. Sooner or later, however, person B is legally and contractually required to to return an identical share to person A.
  - jjav 6y ago
    > when the short contract is up Options are contracts which expire. A short position is not that, it doesn't have any expiration date. It can be untenable to maintain that short position forever due to costs, but that's a different discussion.
_ink_ 6y ago
> and the process can repeat infinitely. If it is possible to 'create' and sell an infinite amount of shares, wouldn't this automatically and artificially dilute the stock price, making these short attacks self-fulfilling prophecies? This makes me think, that the theory that retail traders own more than 100% of GME might actually be true and that this is the reason why the situation is still not resolved.
- alisonkisk 6y ago
  Unbounded not infinite, but yes, that's a concern. But it's a same concerns longs have. If people borrow non-stock (money) and buy too much stock the price goes up, self fulfilling prophecy.
intotheabyss 6y ago
In other words, people continue to conflate money and credit.
dragonwriter 6y ago
> Shorting behaves the same way that fractional reserve banking does, It works the way lending in general works. “Fractional reserve banking” is a very specific, restricted mechanism of lending, and I'm not sure what the equivalent of “depository institutions” with centrally-mandated common “reserve requirements” based on their “deposit liabilities” are in shorting.
- darawk 6y ago
  I'm just using that term because it's one in which people are familiar with the multiplication effect, but yes you're right.
sandworm101 6y ago
>> Person B borrows 1 share of company Y from person A At least there the shares move from one hand to another. Pure option/derivative contracts allow parties make bets on a stock without ever touching actual shares. That's the original dark market I fear is pushing these prices.
dcist 6y ago
When someone borrows a share, do they pay the current share price to borrow it?
manatees 6y ago
You think selling a stock without first owning or borrowing it makes sense?
mrmino 6y ago
You're mistaking naked short selling with shorting same share twice. One is illegal, but there is a lot of loopholes in the legislation that regulates it. The other is rare but technically doable, and perfectly legal.

by darawk 6y ago

oldgradstudent 6y ago

> Shorting behaves the same way that fractional reserve banking does Yes. Except that the fractional reserve banking system has a lender of last resort.

eru 6y ago
Some fractional reserve banking systems do. Historically, systems without lender of last resort have done quite well. See eg the Canadian system of the 19th century, with no lender of last resort, and that often ended up as an emergency lender to the mis-regulated and crisis-prone American system to the south.
sidibe 6y ago
And the whole "fractional" word. You can't lend someone 10 shares based on the one you bought.
- kgwgk 6y ago
  In fact the "fractional" part goes the other way. You can lend the whole share you bought. But the bank cannot lend the whole dollar you deposited, they have to keep a fraction of it as reserve.
  - sidibe 6y ago
    You and I can lend each other all of our money. The bank can lend more than they have.
    - Chris2048 6y ago
      Not really. You. nor the bank, can't lend more money that you have, but you can promise more than you have. That automatically implies something more complicated than lending. At the very least, money was borrowed (on a promise) from a third party in order to provide the money they loaned. You and I can do the same, I can promise you whatever I like. And if I manage to convince you, or a third party, that my promise is good, I can even borrow money from them. And loan out that money, despite not owing it; Unless there is something fraudulent in doing that wrt my agreements with the borrower - but the bank has the same, nationally regulated, restrictions too.
    - kgwgk 6y ago
      If a bank is created and you deposit $1, the bank has $1. They can lend only $0.9 because they need to keep $0.1 as reserve (for example). From there different things could happen: a) if the borrower takes the $0.9 and takes it elsewhere the bank cannot lend a single additional cent until they get more deposits. The fractional reserve means they could only lend a fraction of the dollar. Maybe the money will be deposited in another bank who will then lend to someone else, but for the original bank who got $1 it stops there. b) if that money remains in the bank as a new deposit, they have now $1.9 in deposits. They can lend a fraction of the additional $0.90, and make an additional loan of $0.81 (keeping $0.19 in reserves in total). If the second loan also ends in the bank as a deposit they will have $2.71 in deposits, they can make a new loan etc. but the multiplier is limited. For shares there is no limit at all. If Alice has a share she can lend it to Bob who sells it to Carol. Carol can lend it to Daniel who sells it to Elaine. Elaine can lend it to Felix who sells it to Gloria. Gloria can lend it to Hector who sells it to Ingrid. They can go on for as long as they want and all the ladies will be long one share.
jameshart 6y ago
So does the stock market: a company can always issue more stock. And a market can allow naked short sales to provide liquidity.

stupidcar 6y ago

What your describing still sounds incredibly dodgy. The price of anything is a result of its some intrinsic value and the volume of supply. So a precious stone is valuable because of its beauty, but also because it's rare. If someone mines a billion such stones, it won't affect their individual beauty, but it will certainly reduce the price someone is willing to pay for one. Now, you seem to be saying that short selling is a signal about intrinsic value, but the process you describe, whether you want to call it counterfeit shares or fractional reserve shareholding or whatever also messes with the valuation by inflating the supply. If there are more shares of a given company available, those individual shares will be worth less. The result would seem to be that naked short selling at volume will create a self-fulfilling prophecy. You can drive the price down simply by inflating the supply, regardless of whether the company is well managed or not. Maybe you start with badly-managed companies, but there's always going to be a perverse incentive to target any company so long as you can manipulate the supply enough to force a price drop. If you care about the market as a measure of company health, that doesn't sound like a good idea.

JumpCrisscross 6y ago
> naked short selling at volume will create a self-fulfilling prophecy To be super clear, naked short selling is banned for everyone but market makers [1]. A market maker goes naked short when there is a buying frenzy. Their economic incentive is to then cover the short given they are in a buying frenzy. The NYSE explicitly markets its specialist system to issuers as a stabiliser mechanism. It’s a selling point to long-term investors and Boards. The only people who get upset about this are hedge funds and day traders who get ahead of their skis. [1] By Wall Street tradition, every long losing money must allege naked shorting. That doesn’t substitute for evidence of it. Large amounts of short interest do not indicate naked shorting. (Lots of FTDs do, but this figure has to be scaled to leverage and volatility.)
- eru 6y ago
  Though arguably, naked short selling should be allowed as well. (With certain safe guards and sufficient margin requirements.) After all, we allow something similar to naked short selling when people write options or trade futures. And those markets work just fine.

hagy 6y ago

When person A lends their share to person B, they no longer own a share, they own the right to receive a share from person B sometime in the future, interest payments on the lending, and collateral to ensure the borrower can make good on their obligations. This website seems to mainly be talking about naked short selling, which is selling a stock without first owning or borrowing it. This not necessarily illegal, although can be under some conditions, including aggressive short selling. Wikipedia has a fair amount of info on the practice, https://en.wikipedia.org/wiki/Naked_short_selling https://en.wikipedia.org/wiki/Naked_short_selling The practice of a selling a share that one does not own is supposed to be used by market neutral market makers to ensure their is always liquidity. They must then at some point in the future buy a share from the market to replace the phantom (i.e., counterfeit) share that they sold. This practice is useful when there are suddenly more buyers than sellers and the market maker exhausts their standard supply of shares. Otherwise there may not be any bids on the stock at any price for sometime. Other argue that this is no longer necessary with many participants beyond market makers that also employ algo trading and can quickly adjust to increasing demand. Further, if lack of supply becomes a regular occurrence, investors may start regularly setting high, possibly even ridiculously high, standing sell limit orders such that there will always be bids at some price points.

varispeed 6y ago
Isn't selling something you don't own a fraud or the stock market has an exemption? The instance when A essentially sells the share to B accepting the right to receive the share back as a payment also wouldn't fly in any other environment, as this could just open the door to money laundering. So why is this accepted in the stock market? Or simply the law enforcement doesn't know how to tackle it?
- dcolkitt 6y ago
  > Isn't selling something you don't own a fraud or the stock market has an exemption? I call up Dominos and order a pepperoni pizza. They take my order and process my credit card. They’ve just sold me a pizza that doesn’t exist. Is this fraud?

matwood 6y ago

> This is mostly nonsense. Agreed. People should be able to take the pessimistic side of a trade. The one problem I could see with short selling is not the technical act of selling short, but the (dis)information campaign around a company that appears to follow. But, this happens both ways good and bad so it's probably a wash. > Most of Wall Street hates short sellers, because they drive down the prices of companies and confidence in markets There's also an emotional dislike of the person who wins when you lose. Short sellers are like the person playing 'don't pass' in craps.

wpietri 6y ago
> this happens both ways good and bad so it's probably a wash. Absolutely. A real problem in things that aren't publicly traded on open markets is hype asymmetry. Somebody who wants the share price to go up can put enormous amounts of time and money into creating the appearance that the stock is worth more than it is. But there's no corresponding incentive to puncture the hype. I suspect every one of us can name a privately held startup with a valuation we think is absurdly high. But there's no practical way to bet against them until they're publicly traded and we can short them or buy options (which may get hedged by buying or (short) selling stock).
jml78 6y ago
> But, this happens both ways good and bad so it's probably a wash. Only if you ignore reality. Huge hedge funds are called market movers for a reason. These hedge funds decide to short your company's stock and they have a direct impact on your stock value regardless of whether the hedge fund has any basis for actually shorting. Their "reason" can be 100% bullshit. Doesn't matter. They put a large short position on your company and it has an immediate direct impact. Not only that, like you said about disinformation, it also allows them to get other parts of the market to also jump on board. The way shorting works with hedge funds is that it is a self fulfilling prophecy a huge majority of the time And people talk about how capitalism has driven companies to only care about the next quarter. Everyone realizes this is overall a bad thing. Short sellers are one of the reasons you have to do that. I don't believe shorts have any intrinsic value they are actually bringing to the market. People choosing not to buy stock at existing prices does the same thing people claim shorting does. You don't need to borrow stock and sell it back making a profit to have a functioning trading system.

varispeed 6y ago

This is the problem - someone is selling something they don't own. It's like you borrowed a car from a rental company and then you sold it to someone. Pretty sure that's a crime. If this is allowed on the stock market, then I think this is laziness of law enforcement that they don't know what to do with it. What if the owner wants the item back and the person you sold it to won't sell it? It seems like this may be the problem with Gamestop. If people hold on to their shares, whoever "shorted" them is in a big trouble and rightfully so.

goodluckchuck 6y ago
Yep, just like fractional reserve banking, it demonstrates for a lot of people that there can be a “run” on a stock / brokerage / the entire market. Well, the FDIC insures up to 250k of bank accounts, but what happens when there’s a run on your 401k?
cousin_it 6y ago
You can think of shorting as betting that the stock will go down. For example, Alice can write on a piece of paper: "Anytime anyone wants to sell this paper back to me, I'll pay a sum equal to the price of GME at that moment". Now if Alice sells the paper to Bob, Alice is short and Bob is long, even though none of them touched any stock. Of course if many Alices do that, that will push down the price of GME, because it's market-relevant information that many people think GME will go down. The real problem is counterparty risk. What happens if Alice runs out of money and can't pay up, or there's a run on all Alices at once? So a system of guarantors is needed. But this is far from the simple argument that "selling a borrowed car is stealing".
- varispeed 6y ago
  What this example has anything to do with selling something you don't own? It's like a thief would explain why he "borrowed" a car and then sold it and will promise it will get it back to the owner. Apparently stockmarket has an exemption for this behaviour, maybe they pay big sums to law enforcement to turn the blind eye.

beowulfey 6y ago

>Person A has 1 share of company Y. Person B borrows 1 share of company Y from person A, and then sells it into the market. This is called a short sale. But person B just sold their borrowed share. Now that share is owned by person C. What happens to Person A in this scenario?

jameshart 6y ago
At a later date, Person B returns a share to them. And B pays them for the privilege of borrowing the share in the first place. Person B thinks that it will cost less to buy that share in the future than the money they make from selling the share today, which is why they asked A to lend them the share in the first place. They plan to buy a cheaper share and give that back to A. A doesn’t care if they get back their original share, they just want to get a share back.
- stonemetal12 6y ago
  So rather than borrowing it is more like renting?
mklauber1 6y ago
They get interest from Person B, and when the short contract is up, they can force Person B (or more accurately their broker who passes the price on) to buy a replacement stock, regardless of the price. Alternatively, they can attempt to open another short contract, paying more interest to have continue to borrow the stock. Sooner or later, however, person B is legally and contractually required to to return an identical share to person A.
- jjav 6y ago
  > when the short contract is up Options are contracts which expire. A short position is not that, it doesn't have any expiration date. It can be untenable to maintain that short position forever due to costs, but that's a different discussion.

_ink_ 6y ago

> and the process can repeat infinitely. If it is possible to 'create' and sell an infinite amount of shares, wouldn't this automatically and artificially dilute the stock price, making these short attacks self-fulfilling prophecies? This makes me think, that the theory that retail traders own more than 100% of GME might actually be true and that this is the reason why the situation is still not resolved.

alisonkisk 6y ago
Unbounded not infinite, but yes, that's a concern. But it's a same concerns longs have. If people borrow non-stock (money) and buy too much stock the price goes up, self fulfilling prophecy.

intotheabyss 6y ago

In other words, people continue to conflate money and credit.

dragonwriter 6y ago

> Shorting behaves the same way that fractional reserve banking does, It works the way lending in general works. “Fractional reserve banking” is a very specific, restricted mechanism of lending, and I'm not sure what the equivalent of “depository institutions” with centrally-mandated common “reserve requirements” based on their “deposit liabilities” are in shorting.

darawk 6y ago
I'm just using that term because it's one in which people are familiar with the multiplication effect, but yes you're right.

sandworm101 6y ago

>> Person B borrows 1 share of company Y from person A At least there the shares move from one hand to another. Pure option/derivative contracts allow parties make bets on a stock without ever touching actual shares. That's the original dark market I fear is pushing these prices.

dcist 6y ago

When someone borrows a share, do they pay the current share price to borrow it?

manatees 6y ago

You think selling a stock without first owning or borrowing it makes sense?

mrmino 6y ago

You're mistaking naked short selling with shorting same share twice. One is illegal, but there is a lot of loopholes in the legislation that regulates it. The other is rare but technically doable, and perfectly legal.