3 ms·

Short selling wasn’t the issue in this case. It was loaning out shares to short that straight up didn’t exist.

by chrischattin 4y ago

logifail 4y ago
> loaning out shares to short that straight up didn’t exist We should note that naked shorting was apparently just fine until not that long ago[0]. [0] https://seekingalpha.com/article/4453048-naked-short-selling https://seekingalpha.com/article/4453048-naked-short-selling
Hasu 4y ago
The SEC didn't find any evidence of naked shorts in the GameStop debacle. Some people confuse naked shorts - which are currently illegal - with the simple finance fact that the same stock can be shorted more than once. Let's say A owns 1 stock. I borrow it from him and short sell it to B. Now I owe A one stock, and B owns one stock. There is no reason(1) I can't borrow that stock from B, and short sell it to C. I now owe A and B each one stock, and C owns 1 stock. You can continue doing this as much as you want, and create effectively infinite short positions without ever doing a naked short. (1) Well aside from the the practicalities that it overleverages you and if your short position gets called you are completely screwed, and eventually you might not be able to find any stocks to borrow for shorting purposes, but there's no theoretical reason you can't do this.
- unethical_ban 4y ago
  I'm sure it's because I'm a plebian, but being able to create infinite short positions from one stock seems like a bad thing, whatever the name is.
  - Kinrany 4y ago
    It's not the name, it's the fact that shorting is nothing more than borrowing and selling. Regulating it would mean regulating debt. Perhaps borrowing should involve disclosing other positions in some way.
- aaaaaaaaata 4y ago
  > The SEC didn't find any evidence of naked shorts in the GameStop debacle. "I guess that would be the first time somebody's lied under oath."

3 ms·

Short selling wasn’t the issue in this case. It was loaning out shares to short that straight up didn’t exist.

by chrischattin 4y ago

Short selling wasn’t the issue in this case. It was loaning out shares to short that straight up didn’t exist.

logifail 4y ago
> loaning out shares to short that straight up didn’t exist We should note that naked shorting was apparently just fine until not that long ago[0]. [0] https://seekingalpha.com/article/4453048-naked-short-selling https://seekingalpha.com/article/4453048-naked-short-selling
Hasu 4y ago
The SEC didn't find any evidence of naked shorts in the GameStop debacle. Some people confuse naked shorts - which are currently illegal - with the simple finance fact that the same stock can be shorted more than once. Let's say A owns 1 stock. I borrow it from him and short sell it to B. Now I owe A one stock, and B owns one stock. There is no reason(1) I can't borrow that stock from B, and short sell it to C. I now owe A and B each one stock, and C owns 1 stock. You can continue doing this as much as you want, and create effectively infinite short positions without ever doing a naked short. (1) Well aside from the the practicalities that it overleverages you and if your short position gets called you are completely screwed, and eventually you might not be able to find any stocks to borrow for shorting purposes, but there's no theoretical reason you can't do this.
- unethical_ban 4y ago
  I'm sure it's because I'm a plebian, but being able to create infinite short positions from one stock seems like a bad thing, whatever the name is.
  - Kinrany 4y ago
    It's not the name, it's the fact that shorting is nothing more than borrowing and selling. Regulating it would mean regulating debt. Perhaps borrowing should involve disclosing other positions in some way.
- aaaaaaaaata 4y ago
  > The SEC didn't find any evidence of naked shorts in the GameStop debacle. "I guess that would be the first time somebody's lied under oath."