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I have a few questions on how locates work and shorting: -I hear that the buy side just sprays locate requests to brokers every day without necessarily having a
by Maven911 6y ago
I have a few questions on how locates work and shorting:
-I hear that the buy side just sprays locate requests to brokers every day without necessarily having an intention to short a particular stock with that broker on that day. So brokers naturally accept the locate requests
-Fail to deliver from brokers is very common for shorted stocks from what I hear. With associated fines.
- yanks215 6y agoWhat are your questions? I worked in sec lending at a prime.
- totalZero 6y agoI have a question for you. Let's say a trader on the cash trading desk buys shares from a short-seller who fails to deliver. Does sec lending know that those shares have not yet settled? If it is incorrectly assumed that those shares settled properly on T+2, would the bank potentially loan those shares out prior to delivery?
- totalZero 6y agoCustomers have a reasonable basis to ask for borrow pricing daily because rates and availability change frequently, and the cost of the short is one of the factors influencing the decision whether to trade it or not. A locate request is basically "hey do you have shares to lend out, or can you find some?" It makes total sense that FTD would affect shorted stocks, because it generally arises from a short sale and the heavily shorted names are the ones where borrow is tight.