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I have heard no claims of naked short selling that came with any evidence. Not saying that it hasn’t happened, just that there are other explanations which seem

I have heard no claims of naked short selling that came with any evidence. Not saying that it hasn’t happened, just that there are other explanations which seem to be more relevant / explicatory here.

XFrequentist 6y ago
What other explanation is there for more than 100% of GME stock being sold short (genuine question)?
- fractionalhare 6y ago
  Briefly: a share which has been sold short can be sold short again by the person who buys it from the borrower/short seller. In practice, this often occurs due to regular market mechanics when a particular company is a hot short target. All that's required is a widespread consensus that the company's financials suck (in not so few words).
- rspeele 6y ago
  Alice lends his 1 stock to Bob. Bob sells it to Charlie (but is still on the hook to return it) Charlie lends his 1 stock to Dave. Dave sells it to Eddie (but is still on the hook to return it). There is only 1 stock being traded here, but there are two loans (shorts) out on it with obligations to return it.
  - Apocryphon 6y ago
    Sounds like a precarious series of transactions to base an economy around.
    - notahacker 6y ago
      Wait until you hear about the US dollar...
    - deleted 6y ago
      [deleted]
    - rspeele 6y ago
      That's finance! What's really fun is that Alice and Charlie may not even know that they've lent their stock. Their broker, having a substantial amount of the stock pooled across all accounts they manage, may lend it out and still let Alice and Charlie trade their "share" -- since if Alice wants to sell, the broker can always sell on of the other shares from their pool. As long as the broker keeps a decent amount of shares still in their possession, and as long as all accountholders don't try to liquidate at the same time, it's fine. Even if you DID try to liquidate your position and whoopsie, the broker actually lent out all their shares and there are none left for them to sell, the broker could buy your share obligation with cash and you wouldn't know the difference between that and selling it to another shareholder. This is the type of thing that gets some people's back up. It all sounds very "precarious" as you say. There is a reaction that says, whoa, that's way too complicated and abstracted, this whole thing is a house of cards just waiting to collapse. But it's kind of like a long-lived piece of software, which accumulates complexity from the need to deal with a complex world. Only new programmers have the urge to tear it all down and start from scratch -- because old programmers have found that the "new" system ends up reinventing the complexity of the old as it discovers the same problems and missing features of the "simple" approach. Today you see this happening with cryptocurrency.
      - sigstoat 6y ago
        > What's really fun is that Alice and Charlie may not even know that they've lent their stock. last i checked brokers _cannot_ just loan out random alice and charlie's shares. only once you've got a margin account and you've gone into debt can they use your shares. if you've got a margin account and you didn't read the contract, well... god help you, nobody else can. as i understand it, loaned shares generally come from large institutional investors. the folks managing your index funds make extra money by loaning the underlying shares. (maybe that's what you meant? but the prospectuses for index funds make it clear that they do this sort of thing.)
        rspeele 6y ago
        Yeah, I don't mean to imply that this is necessarily happening to anybody who's holding a stock. It depends on your broker and the terms you've agreed to. On some brokers it's an opt-in thing and you get to reap the rewards (interest) of lending out your shares. A friend of mine has been doing this with QuantumScape stock and collected a sizeable amount just from lending it through its December run-up, in addition to the direct gains. My impression is that the zero-fee brokers like RH are the ones more likely to do this without your opt-in consent (of course you do agree to it across the board in their terms), but I'm not an expert.
  - kneel 6y ago
    This is how debt bubbles are ignited.
Apocryphon 6y ago
Claims do not have to be true for people to get angry about it. I'm attempting to explain the narrative of emotion, not what necessarily happened in the market. I'm responding to the last sentence about "which made some people angry."
tomp 6y ago
Apparently this is proof: https://www.nyse.com/regulation/threshold-securities https://www.nyse.com/regulation/threshold-securities From this comment: https://news.ycombinator.com/item?id=25946012 https://news.ycombinator.com/item?id=25946012

XFrequentist 6y ago

What other explanation is there for more than 100% of GME stock being sold short (genuine question)?

fractionalhare 6y ago
Briefly: a share which has been sold short can be sold short again by the person who buys it from the borrower/short seller. In practice, this often occurs due to regular market mechanics when a particular company is a hot short target. All that's required is a widespread consensus that the company's financials suck (in not so few words).
rspeele 6y ago
Alice lends his 1 stock to Bob. Bob sells it to Charlie (but is still on the hook to return it) Charlie lends his 1 stock to Dave. Dave sells it to Eddie (but is still on the hook to return it). There is only 1 stock being traded here, but there are two loans (shorts) out on it with obligations to return it.
- Apocryphon 6y ago
  Sounds like a precarious series of transactions to base an economy around.
  - notahacker 6y ago
    Wait until you hear about the US dollar...
  - deleted 6y ago
    [deleted]
  - rspeele 6y ago
    That's finance! What's really fun is that Alice and Charlie may not even know that they've lent their stock. Their broker, having a substantial amount of the stock pooled across all accounts they manage, may lend it out and still let Alice and Charlie trade their "share" -- since if Alice wants to sell, the broker can always sell on of the other shares from their pool. As long as the broker keeps a decent amount of shares still in their possession, and as long as all accountholders don't try to liquidate at the same time, it's fine. Even if you DID try to liquidate your position and whoopsie, the broker actually lent out all their shares and there are none left for them to sell, the broker could buy your share obligation with cash and you wouldn't know the difference between that and selling it to another shareholder. This is the type of thing that gets some people's back up. It all sounds very "precarious" as you say. There is a reaction that says, whoa, that's way too complicated and abstracted, this whole thing is a house of cards just waiting to collapse. But it's kind of like a long-lived piece of software, which accumulates complexity from the need to deal with a complex world. Only new programmers have the urge to tear it all down and start from scratch -- because old programmers have found that the "new" system ends up reinventing the complexity of the old as it discovers the same problems and missing features of the "simple" approach. Today you see this happening with cryptocurrency.
    - sigstoat 6y ago
      > What's really fun is that Alice and Charlie may not even know that they've lent their stock. last i checked brokers _cannot_ just loan out random alice and charlie's shares. only once you've got a margin account and you've gone into debt can they use your shares. if you've got a margin account and you didn't read the contract, well... god help you, nobody else can. as i understand it, loaned shares generally come from large institutional investors. the folks managing your index funds make extra money by loaning the underlying shares. (maybe that's what you meant? but the prospectuses for index funds make it clear that they do this sort of thing.)
      - rspeele 6y ago
        Yeah, I don't mean to imply that this is necessarily happening to anybody who's holding a stock. It depends on your broker and the terms you've agreed to. On some brokers it's an opt-in thing and you get to reap the rewards (interest) of lending out your shares. A friend of mine has been doing this with QuantumScape stock and collected a sizeable amount just from lending it through its December run-up, in addition to the direct gains. My impression is that the zero-fee brokers like RH are the ones more likely to do this without your opt-in consent (of course you do agree to it across the board in their terms), but I'm not an expert.
- kneel 6y ago
  This is how debt bubbles are ignited.

Apocryphon 6y ago

Claims do not have to be true for people to get angry about it. I'm attempting to explain the narrative of emotion, not what necessarily happened in the market. I'm responding to the last sentence about "which made some people angry."

tomp 6y ago

Apparently this is proof: https://www.nyse.com/regulation/threshold-securities https://www.nyse.com/regulation/threshold-securities From this comment: https://news.ycombinator.com/item?id=25946012 https://news.ycombinator.com/item?id=25946012