Short Selling Overview July '09: Changes in Liquidity and Demand

Please find attached a study of changes in liquidity (lendable) and demand (shorts) across major global markets. This is an extension of the presentation Len Welter gave at the Data Explorers NY forum and is referenced in an interview with Factset.

Overview:

• Analysis of the short selling markets over the past eighteen months
• 4500 stocks analyzed in the US, Canada, UK, France, Germany, Japan and Australia (approximately 95% of market cap for each main exchange)
• DESLI (Data Explorers Securities Lending Index) methodology used to calculate change in levels of supply and demand without impact from changes in price, trade volume or f/x
• DESLI (Short): change in Percent Shares Outstanding on Loan
• DESLI (Lendable): change in Percent Shares Outstanding Available to Borrow
• All indices benchmarked to 100 as of 2 January 2008

Findings:

• Short interest was declining in most markets prior to September 2008
• Adjusting for seasonal impacts on securities lending, over the past three months the level of short interest is down roughly 15% across global markets
• Over the past month the US markets have seen a small increase in short interest but is still down considerably from the highs in 2008
• Even as cash markets have rallied from their March 2009 lows we have seen the lendable remain relatively flat

Download PDF of Study - View podcast of Factset Interview