lavalyn

Short Selling: Myths and Facts

glassbox: institutional investors allow the borrowing of shares because it generates additional revenue. "Yes, you may use these shares in this pension trust to be lent for short selling, in exchange for a fixed fee per month." The brokerages make money on the lend too, of course. There's apparently some interesting tax ramifications as well, as dividends paid by shorts are not treated the same as dividends received... I am unfortunately not a tax expert.

Short Selling: Myths and Facts

American: yes, that is correct. Ideally, the locate should also be a lock, so that other people can't use those shares as well for the short. In practice, because the successful locate for shorting generates revenue for the lender, that doesn't happen. I wouldn't blame the resulting increase in float on the borrower (short) side, but on the lender side... oh, who's on the lending side? The prime brokerages, like Morgan Stanley et al.