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The key insight is the order of reversal doesn't matter, and that any securities trade/position is eventually reversed (its the only action available). Hence ha
by phyalow 4y ago
The key insight is the order of reversal doesn't matter, and that any securities trade/position is eventually reversed (its the only action available). Hence having synthetic positions outstanding via rehypothecation doesnt actually matter as they are fungible with normal float.
- anigbrowl 4y agois eventually reversed (its the only action available) But this assumes normal market operation, which a short squeeze is not. Suppose in the example above A buys the share from D and sells back to the original issuer, who then refuses to lend it out again. C can't pay back B and presumably goes bankrupt. It only makes sense if people are required to lend securities to anyone who wants to borrow them.