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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, colla

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.