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hahahah. yes, SEC needs to shut this down. it’s right on their list after punishing hedge funds for shortselling shares that don’t exist. /s

thefreeman 6y ago
cmon man. it's been explained countless times how short interest could be over 100% without anyone short selling shares that don't exist. if you still don't understand it you are essentially hiding your head in the sand to try to deny reality.
- jtdev 6y ago
  I'd love to see where this has been explained. I've not seen this anywhere.
  - mikeyouse 6y ago
    One such example: https://www.fool.com/investing/2021/01/28/yes-a-stock-can-have-short-interest-over-100-heres/ https://www.fool.com/investing/2021/01/28/yes-a-stock-can-ha... > As an example, take a situation involving four investors. Annie owns shares of GameStop, and Annie and her broker have an agreement that allows the broker to lend Annie's shares to short-sellers. It lends them to Bob, who subsequently sells those borrowed shares short in hopes that GameStop's share price will fall. > An investor named Chris ends up buying those borrowed shares from Bob. However, Chris has no way of knowing that those shares have been borrowed from Annie. To Chris, they're just like any other shares. > More importantly, if Chris has the same kind of agreement, then Chris's broker can lend out those shares to yet another investor. Diane, another GameStop bear, can borrow those shares and sell them short. > In this example, the same shares end up getting borrowed and sold twice. The short interest volume these transactions add to the total is twice the number of shares actually involved. You can therefore see that if this happened throughout the market, total short interest would eventually exceed the number of shares outstanding and approach 200%.
    - jtdev 6y ago
      Okay, but this still seems like a perversion of market mechanics that should be regulated/banned.
      - hntrader 6y ago
        Sort of like fractional reserve banking? In practice it doesn't make a big difference whether it's banned or not. Stocks almost never have a short-interest above 100%, and the larger the short-interest the less attractive it becomes to join in so there's already negative feedback built in.
        Judgmentality 6y ago
        > In practice it doesn't make a big difference whether it's banned or not. Stocks almost never have a short-interest above 100% Except it just happened? This is like arguing for not fixing a really weird state in code. "It's not supposed to be able to get into that state so we just ignore it."
        hntrader 6y ago
        > This is like arguing for not fixing a really weird state in code That's not a valid analogy. The reason we fix bugs and address code smells is that the cost of doing so is relatively low and the benefit is large from both a tail-risk mitigation perspective and technical debt perspective. If we're going to go through the rigmarole of passing new regulations in order to solve some problem, the problem should be of sufficient magnitude to justify the associated costs: (i) The cost of compliance to industry, which would be humongous, since you now need a centralized authority to track who owns the actual float versus the shorted float, and for this information to be communicated between all stakeholders & said authority. Then each stakeholder needs to build internal processes and software around this data to ensure they are compliant. (ii) The time & financial cost of enforcement and penalties, to both regulators (taxpayer) and industry. (iii) Possible unintended consequences, such as corporatist corruption of the specifics in order to entrench established interests. Evidence or reason hasn't been provided that this is even a problem, let alone a problem of any meaningful magnitude deserving of regulation.

thefreeman 6y ago

cmon man. it's been explained countless times how short interest could be over 100% without anyone short selling shares that don't exist. if you still don't understand it you are essentially hiding your head in the sand to try to deny reality.

jtdev 6y ago
I'd love to see where this has been explained. I've not seen this anywhere.
- mikeyouse 6y ago
  One such example: https://www.fool.com/investing/2021/01/28/yes-a-stock-can-have-short-interest-over-100-heres/ https://www.fool.com/investing/2021/01/28/yes-a-stock-can-ha... > As an example, take a situation involving four investors. Annie owns shares of GameStop, and Annie and her broker have an agreement that allows the broker to lend Annie's shares to short-sellers. It lends them to Bob, who subsequently sells those borrowed shares short in hopes that GameStop's share price will fall. > An investor named Chris ends up buying those borrowed shares from Bob. However, Chris has no way of knowing that those shares have been borrowed from Annie. To Chris, they're just like any other shares. > More importantly, if Chris has the same kind of agreement, then Chris's broker can lend out those shares to yet another investor. Diane, another GameStop bear, can borrow those shares and sell them short. > In this example, the same shares end up getting borrowed and sold twice. The short interest volume these transactions add to the total is twice the number of shares actually involved. You can therefore see that if this happened throughout the market, total short interest would eventually exceed the number of shares outstanding and approach 200%.
  - jtdev 6y ago
    Okay, but this still seems like a perversion of market mechanics that should be regulated/banned.
    - hntrader 6y ago
      Sort of like fractional reserve banking? In practice it doesn't make a big difference whether it's banned or not. Stocks almost never have a short-interest above 100%, and the larger the short-interest the less attractive it becomes to join in so there's already negative feedback built in.
      - Judgmentality 6y ago
        > In practice it doesn't make a big difference whether it's banned or not. Stocks almost never have a short-interest above 100% Except it just happened? This is like arguing for not fixing a really weird state in code. "It's not supposed to be able to get into that state so we just ignore it."
        hntrader 6y ago
        > This is like arguing for not fixing a really weird state in code That's not a valid analogy. The reason we fix bugs and address code smells is that the cost of doing so is relatively low and the benefit is large from both a tail-risk mitigation perspective and technical debt perspective. If we're going to go through the rigmarole of passing new regulations in order to solve some problem, the problem should be of sufficient magnitude to justify the associated costs: (i) The cost of compliance to industry, which would be humongous, since you now need a centralized authority to track who owns the actual float versus the shorted float, and for this information to be communicated between all stakeholders & said authority. Then each stakeholder needs to build internal processes and software around this data to ensure they are compliant. (ii) The time & financial cost of enforcement and penalties, to both regulators (taxpayer) and industry. (iii) Possible unintended consequences, such as corporatist corruption of the specifics in order to entrench established interests. Evidence or reason hasn't been provided that this is even a problem, let alone a problem of any meaningful magnitude deserving of regulation.