EC SD | Tank2516 - 2/5/2024 21:24
Yea! I don’t think that is correct, but what do I know.
I didn't think so either, but I really learned a lot during the Gamestop frenzy.
1) When someone wants to short, the brokers lend them a share on the spot and that borrowed share gets sold. The brokers are supposed to find a lender but if they cannot find a lender by the end of the day, it shows up on an end-of-day report as a share that "failed to deliver". Tons of these on GME at the peak and it turns out nothing happens to the broker for failing to deliver those borrowed shares. They have 30 days to find a lender according to the regs, but those don't seem to even be enforced. In the meantime, those "extra" shares are out there being traded and no one knows if they own one or not when they buy and broker shows it in their account.
2) If the borrowed share gets found by the end of the day, that is the normal course. Normal means that two people own that shorted share - the lender and the new buyer. If these two use different brokers, then there are no controls in place to prevent that co-owned share from being loaned again to another short seller. So the new owner doesn't know they have a co-owned share and lends it out again to a short seller. Now the share is co-owned three ways. All three owners see it in their account as a normal share and the number of shares being traded has gone up by two shares (one real and two not). This can continue until no shares can be found by the end of the day and then refer to #1 above.
3) From the above two manners, GME reached a point where far more than their entire float was shorted. In fact far more than their entire legally-authorized share count was being traded. |
Could we influence a short squeeze on the corn futures?
