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  • vestigator2 vestigator2 Jun 10, 2011 10:38 AM Flag

    basic question about short selling

    Many folks seem to think that the number of shares short can not exceed the float unless there is illegal naked short selling occuring. Is that true or false?

    I'm thinking that the number of shares short could legally exceed the float because shares that are borrowed and sold short then end up in another account from which they can be legally borrowed again. Does anybody know for sure how this works, are there any regulations preventing the loaning of already loaned shares?

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    • The answer is that the number of shares that can be shorted is only limited by the number of shares that are available from lenders, and the desire of others to short sell the shares.

    • Borrowed shares are flagged and cannot be relent for a second short sale. The shares are not tied from Lender A to short seller B. The lender will offer his shares into a borrow pool and many different investors may borrow shares from that total number.

      Fidelity might loan 200,000 shares and 20 sellers might each borrow 10,000 of those share.


      • 2 Replies to waldo_mushman
      • You are so full of crap, john. There is no "flag" on shares that have been shorted. That has to be about the dumbest thing ever uttered in the realm of corporate finance. Provide one freaking reference for that stupidity, john.

        Explain how they keep track of those shorted shares to prevent them from being shorted again. If you buy shares that have been shorted, you are saying you can't lend them to a short seller. Those shares are not worth as much as shares that can be lent. How do the purchasers of "flagged" shares get compensated? Do you really believe this crap, john?

        I know you are laughing all the way to the bank john, but you are really making a clown of yourself.

      • waldo;I asked a broker some questions about shorting and I believe yhe said that shares are borrowed from margin accounts even if no margin is used.that limits shorting and if you move all your stock to non margin acount you can easily cause a short squeeze...if a lot of holders do the same thing...coe