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Astec Analytics, a division of SunGard Data Systems, provides investors with short selling market color using data from the securities lending market.
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  • Risk arb traders benefit from higher Nasdaq/ICE bid for NYSE Euronext; but should they cover their shorts of Deutsche Boerse? 0 comments
    Apr 1, 2011 12:48 PM | about stocks: NDAQ, NYX, ICE, DBOEY, SPXCF, ASXFF, TMXXF

    Funds began shorting Deutsche Boerse on Jan 25, and the utilization rate (shares borrowed divided by shares available) for Deutsche Boerse on Short Side increased from 1% to 100% in just two weeks. 

    The spread between the offer from Deutsche Boerse and the current share price of NYSE went from positive to negative, meaning that traders bid up the price of NYSE passed the price that Deutsche Boerse offered, because traders believed that Nasdaq would make a higher bid, which Nasdaq in fact did today.

    Presumably with long positions in NYSE and short positions in Deutsche Boerse, traders playing the spread benefited from the increased offer from Nasdaq.  But if the deal with Nasdaq doesn't go through, and the deal with Deutsche Boerse doesn't go through, maybe it's time to unwind?  Or maybe at least cover the short positions in Deutsche Boerse?

    I'll update what happens in the securities lending market today with Deutsche Boerse, but as of yesterday night, shares borrowed had not decreased much and the utilization rate in the security was still at a very high 93%.

    The other stock exchanges that are making bids to acquire other exchanges, London trying to acquire Toronto, and Singapore trying to acquire Australia, do not have as high of a utilization rate.  Investors are borrowing 62% of available shares of London Stock Exchange and 34% of available shares of Singapore's exchange.  The borrowing costs for both London and Singapore are also not very high.


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