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  • Stocks that became more expensive to borrow and short from May 30 to June 6 [View instapost]
    Sorry, I've changed my job duties significantly and there's no replacement as of yet. But I will continue to post here as often as possible. Thanks for the feedback.
    Jul 8 08:22 AM | Likes Like |Link to Comment
  • Short sellers have been steadily building up positions in AIG since early January [View instapost]
    There was an article in the WSJ yesterday -- Investors Show Interest in AIG Stock Sale -- online.wsj.com/article...

    It's still in the initial stages between Treasury and unnamed investors, but investors have evidently given interest that they'd be willing to purchase X million shares at $30.
    May 17 09:54 AM | Likes Like |Link to Comment
  • Stocks that are generating the most revenue for institutional lenders - may be a better list than most expensive stocks to short [View instapost]
    I work for a division of SunGard and we collect cost-to-borrow information from dozens of lending banks and borrowing broker dealers on a daily basis. We're not involved in the trading; we're just an information aggregator. We then publish aggregate stats on ShortSide.com for investors who want to monitor what's happening in the securities lending market on a daily basis.

    I hope this helps answer your question.
    May 9 02:28 PM | Likes Like |Link to Comment
  • Stocks with the largest increase in cost-to-borrow last week [View instapost]
    Zishi,

    Right now, SunGard Astec collects this data from dozens of banks and broker dealers and only publishes it on websites that require subscriptions to access (such as ShortSide.com). I'm posting lists on Seeking Alpha to try to generate additional interest in the product. If you'd like a free 30-day trial to ShortSide.com, I'd be more than happy to set you up.

    Meanwhile, the SEC is currently asking for public comment regarding the disclosure of short selling activity on a daily basis (www.bloomberg.com/news...). And other regulators around the world have already required short sellers to disclose their short positions on a daily basis, sometimes with only a two or three day lag. For instance, France, Japan, Greece and the UK (but for the UK only for select financial stocks), publishes hedge funds' short interest positions on a daily basis. Japan and France are the most interesting. Japan has been requiring public disclosure for over a year now. For Japan, go to this page on the Tokyo Stock Exchange's website -- www.tse.or.jp/english/.... In each day's zip file, you'll find PDFs for every hedge fund that had short positions over the threshold in Japanese equities. Interesting right?

    I hope this helps.
    May 6 11:05 AM | Likes Like |Link to Comment
  • Most expensive stocks to short [View instapost]
    otatais,

    Naked shorting is when a prime broker sells shares short on behalf of his hedge fund client but does not borrow the shares and does not deliver them 3 days later to the long buyer. However, naked shorting is not necessarily unacceptable. There may be a perfectly acceptable reason for a broker to fail to deliver. For instance, if the broker is acting as a market maker and provider of liquidity. But the broker should attempt to settle his failure as soon as possible.

    The SEC discourages failing to deliver and penalizes brokers that have outstanding fails. The penalty is that brokers are not allowed to short sell any other shares of that stock if they have an outstanding fail. Of course it's possible that a broker could naked short sell a significant number of shares and simply not short any additional shares but still have that outstanding fail to deliver.

    I can't speak to the prevalence of naked shorting because our database only touches on shares that have actually been borrowed.
    Oct 29 10:45 AM | Likes Like |Link to Comment
  • Most expensive stocks to short [View instapost]
    otatais,

    Unfortunately, you can't make any trading decisions based on a stock being on the threshold list for X number of days.

    As you may know, Reg SHO requires broker dealers to close out any failure-to-deliver positions that they have in a threshold security that has been on the threshold list for 13 consecutive days. However, broker dealers are not forced to close-out their failure-to-deliver positions. Rather, the broker dealer that doesn’t close out is only penalized. The penalty is that the broker dealer cannot execute further short sales in that stock without a “bona-fide” locate or pre-borrow arrangement. Therefore, there will not necessarily be buying activity (significant or otherwise) on the 14th day that a stock has been on the threshold list.

    Does that answer your question?
    Oct 8 11:45 AM | Likes Like |Link to Comment
  • Can an ETF Collapse? [View article]
    LKallimo,

    I agree with you for the most part, but you didn't go far enough in your explanation. You said that the prime broker of the short seller has to deliver T+3 or fail. I agree with you. But this is where I don't think that Andrew Bogan understands the short selling / securities lending aspect well enough because he says that short sellers can "create to cover" whereas I think he means that they can "create to deliver". Because a short seller needs to deliver something to the investor he sold to or else he fails.

    But anyway...What exactly (and specifically) does the prime broker deliver to the long buyer? Can a prime broker "create" shares of an ETF without dealing with / notifying the ETF operator (such as BlackRock / BGI or State Street)? Can the prime broker create ETF shares through derivatives / swaps and deliver these shares to the long buyer? If so, are these derivative-backed ETF shares identical to the shares issued by the ETF operator?

    Thanks for your further help.
    Oct 6 04:30 PM | 1 Like Like |Link to Comment
  • Most expensive stocks to short [View instapost]
    otatais,

    I just put in a chart for CCME in another blog post, so please take a look.
    Oct 6 10:02 AM | Likes Like |Link to Comment
  • Most expensive stocks to short [View instapost]
    otatais,

    Thanks for your question. When you say "naked shorting", I want to be clear that the data that we collect from the securities lending market has nothing to do with naked shorting. The borrow volume that we see in the securities lending market are broker dealers that are by definition NOT enablers of naked shorting...because they're borrowing stock in order to deliver it to long buyers on the other side of a short sale.

    Regarding CCME, we've seen increased borrowing and shorting activity since early June. As often happens in any market, people in the know were able to borrow and short hundreds of thousands of shares for a few months at relatively inexpensive borrow rates. Then other market participants began to realize what was going on, other hedge funds piled into the trade, and the cost-to-borrow increased exponentially starting in early September.

    Currently, the utilization rate (the number of shares borrowed from institutional investors divided by the number of shares those same institutional investors have available) is at 99.7% so CCME is almost impossible to borrow. The cost to borrow is also extremely high.

    Short interest was reported as 3.3 million on Sept 15. Shares borrowed in our system increased 35% from Sept 15 to Sept 30, so I would expect a similar jump in short interest when it's reported for Sept 30.

    Please let me know if you have any other questions. It's not that I don't want to talk about naked shorting, but it's technically illegal (excluding legitimate market making).
    Oct 6 09:53 AM | Likes Like |Link to Comment
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