"Are ETFs Really Safe?"
- Thread starter abattia
- Start date
From the article:
DG: But in a traditional short-selling situation, you typically have to borrow the shares before you can short them.
AB: Yes, and that's true here too. But if you look at the Securities Settlement Failure data, ETFs are very oddly overrepresented, so it does look like there is some short-selling that happens before the shares are borrowed. But that's a small matter. The problem is that there is no limit to the amount of short-selling you can theoretically do while still having borrowed the shares. It simply requires the same share to have been borrowed, short-sold, borrowed from the new owner and short-sold again down a daisy chain. That's how you get these arbitrarily large short interest figures.
Can't this daisy chain of short sales occur with regular stocks? A buys a stock, B borrows the shares from A and sell them short to C, D borrows the shares from C and sells them short to E, etc. Or is there some mechanism to keep this from happening?
DG: But in a traditional short-selling situation, you typically have to borrow the shares before you can short them.
AB: Yes, and that's true here too. But if you look at the Securities Settlement Failure data, ETFs are very oddly overrepresented, so it does look like there is some short-selling that happens before the shares are borrowed. But that's a small matter. The problem is that there is no limit to the amount of short-selling you can theoretically do while still having borrowed the shares. It simply requires the same share to have been borrowed, short-sold, borrowed from the new owner and short-sold again down a daisy chain. That's how you get these arbitrarily large short interest figures.
Can't this daisy chain of short sales occur with regular stocks? A buys a stock, B borrows the shares from A and sell them short to C, D borrows the shares from C and sells them short to E, etc. Or is there some mechanism to keep this from happening?
I found an interesting documentary that talks about short selling shares of stock that amounts to many times the float of the stocks themselves, causing big problems for these companies. Apparently its a pretty big problem not many people know much about. They call them phantom shares.
http://video.google.com/videoplay?docid=4490541725797746038#
http://video.google.com/videoplay?docid=4490541725797746038#
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Sounds like , from that article, they are in lots better shape than;
the many of players 1987 market crash[not a flash crash @ all. ] NYSE Specialists ran out of money/bankrupt....................................;number 1 phone call for Leo of the Chicago Merc to return on his long list-Fed head Alan Greenspan. ''God help me he said''..............................
Think the longs owed the shorts 2.5 billion bucks[Leo of Chicago Merc said] ;
lot of money in 1987. Silver dropped to $7+/, not much of a % drop for the year @ all
Thanks
