4 ms·

Another day, another attempt by someone who doesn't understand the financial markets, especially as it relates to GME. The truth is that the 140% figures is me

by wyxuan 6y ago

Another day, another attempt by someone who doesn't understand the financial markets, especially as it relates to GME. The truth is that the 140% figures is merely a misleading figure Matt Levine debunks the naked short selling idea here: (see footer #3 to read what I'm talking about) https://www.bloomberg.com/opinion/articles/2021-01-25/the-game-never-stops?sref=e2TM0yf8 https://www.bloomberg.com/opinion/articles/2021-01-25/the-ga... but the gist of it is that each share can be borrowed more than once, so the float seems higher than it actually is.

michaelscott 6y ago
For me this is an issue of how the data is presented. I like the explanation provided in the footnote at your link because it highlights that issue: A lending (in effect) 90 shares to D does not mean that there are now 180 shares in ownership. What A has after this lend is simply a promise to pay back at market rate for the shares and it's D who now owns the original 90 shares
- cesaref 6y ago
  Right, and the lenders are typically institutions who are holding the stock for reasons other than speculation (e.g as part of a tracker fund for clients) and are simply attempting to extract more value from their holding. No point it sitting there in your depot account if you can get paid a few % by lending it.
cesaref 6y ago
Yes, it's misleading. I wrote a stock borrowing system for an investment bank 10 years ago or so, and there is a fair bit of complexity around registrars, collateral, dividends etc. The 'A shorts to B who shorts to C' type arrangement is unlikely in the extreme. Would B keep paying A for the borrow (and have the collateral tied up) if they have passed the stock to C? Nope, they'd return it... There's also other products which would alter the exposure to securities without ownership, such as total return swaps. These aren't going to appear at the registrar, so who has exposure is more complicated (add in futures and options etc etc).
- thedufer 6y ago
  > The 'A shorts to B who shorts to C' type arrangement is unlikely in the extreme. Would B keep paying A for the borrow (and have the collateral tied up) if they have passed the stock to C? Nope, they'd return it... I think you might've misunderstood the explanation. In Matt Levine's example, A lends to C, who sells to D, who lends to E, who sells to F. B can't just return the shares to A because they've sold them, and they aren't just going buy them back because the whole point is that they want to be short.

by wyxuan 6y ago

michaelscott 6y ago

For me this is an issue of how the data is presented. I like the explanation provided in the footnote at your link because it highlights that issue: A lending (in effect) 90 shares to D does not mean that there are now 180 shares in ownership. What A has after this lend is simply a promise to pay back at market rate for the shares and it's D who now owns the original 90 shares

cesaref 6y ago
Right, and the lenders are typically institutions who are holding the stock for reasons other than speculation (e.g as part of a tracker fund for clients) and are simply attempting to extract more value from their holding. No point it sitting there in your depot account if you can get paid a few % by lending it.

cesaref 6y ago

Yes, it's misleading. I wrote a stock borrowing system for an investment bank 10 years ago or so, and there is a fair bit of complexity around registrars, collateral, dividends etc. The 'A shorts to B who shorts to C' type arrangement is unlikely in the extreme. Would B keep paying A for the borrow (and have the collateral tied up) if they have passed the stock to C? Nope, they'd return it... There's also other products which would alter the exposure to securities without ownership, such as total return swaps. These aren't going to appear at the registrar, so who has exposure is more complicated (add in futures and options etc etc).

thedufer 6y ago
> The 'A shorts to B who shorts to C' type arrangement is unlikely in the extreme. Would B keep paying A for the borrow (and have the collateral tied up) if they have passed the stock to C? Nope, they'd return it... I think you might've misunderstood the explanation. In Matt Levine's example, A lends to C, who sells to D, who lends to E, who sells to F. B can't just return the shares to A because they've sold them, and they aren't just going buy them back because the whole point is that they want to be short.