The Many Mysteries of Shorting:Invalid Short Reports? Why Shorts Pay Over 100% Interest? Etc., Etc.

abnormal said:
in Italy there is an obligation to report when taking short
positions greater than 0.5% of capitalization. I do not know if it's an esma directive.
I've never seen it done in other European countries.

When they report the overcoming of 0.5% it is unknown if they
have just started and if they will continue to short or if they are
preparing to liquidate to leave the position. Surely they will find
less expensive systems to borrow stocks. However they are required
to notify the variation every day at 16.00 Italian time.

so if you then see 0.40 0.30 it's because they start moving

http://www.consob.it/web/area-pubblica/pnc
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I made a mistake.
The maximum decrease is seen only up to 0.5% and not 0.40 - 0.30 etc.
You will see for example 1 0,08 0,06 0,5 and then they are removed from the list.
 
darp said:
HEAR is #1 at 62% short, yet only 19.4% interest rate???
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it sounds similar to the old misery index which equaled the inflation rate plus the unemployment rate,
of course if you are right on the trade there is no misery.
 
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Maybe there are more factors involved in short lend rates. One possibility is insiders with stock grants or slowly vesting option grants that short to hedge so lend rate is worth the cost. I think TRXC 40s percent rate (I receive 20s) is caused by shorting from employee grants hedging and warrants. Also convertible bonds may be a factor. Another possibility is option spread pricing. I think quite a few option spreads involve shorting stock legs. Have you looked at these extra factors?
 
vanv0029 said:
Maybe there are more factors involved in short lend rates. One possibility is insiders with stock grants or slowly vesting option grants that short to hedge so lend rate is worth the cost. I think TRXC 40s percent rate (I receive 20s) is caused by shorting from employee grants hedging and warrants. Also convertible bonds may be a factor. Another possibility is option spread pricing. I think quite a few option spreads involve shorting stock legs. Have you looked at these extra factors?
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On the stocks in question very low insider ownership, as in 5% or less. As normal nothing makes sense in Short Lend Interest Rate Twilight Zone. But thanks for idea. No one else has been able to answer the riddle.

More data. Of the 20,000 or so USA stocks only two have very high lend interest rates, month after month with most of you stock getting lent. AIPT and RNKLF, and have reasonable or highly likely chance to proper respectively. That is 1/100th of one percent.

So rare in those two cases the stock being over 100% shorted by naked shorts, thus they are unable to get out, is best I can come up with. But then all the other backwards stuff such as the most shorted stocks with 50% short have tiny 2% interest rates while barely shorted stocks can have 106% interest rates still remains.
 
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darp - ever try talking to IB about the rates? Maybe some back office people can give you a more clear answer or let you know why its so messed up. I would love to hear why if you figure it out.
 
Sucat said:
darp - ever try talking to IB about the rates? Maybe some back office people can give you a more clear answer or let you know why its so messed up. I would love to hear why if you figure it out.
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Good idea, have asked for just that, never got call back. Will try again. Thanks
 
zdreg said:
it only messed up in your mind and others who don't like the rates outcome.

rates are determined by supply and demand at a given moment in time.
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Hi, Think if you look at the data you will change your mind, the heavily shorted stocks have low interest rates and the stocks NASDAQ claims have low short positions have high interest rates. That is what this thread is about, it is backwards of supply and demand. And that can go on for years on same stock like AIPT, not minutes. For last year have been getting rather huge interest payments on AIPT, about 100% annualized.
 
sle said:
It's not about the fractional short interest, it's about the availability of stock to borrow.

A lot of institutional investors and other big holders do not like lending the stock because that depresses the stock price. So the short interest is low and short rebate is high for stocks with high institutional ownership. That is different for stocks held by hedge funds via their primes, stocks that are part of large ETFs and stocks with high retail ownership. Most retail investors hold the stock in a discount broker who usually had a stock lending agreement as part of the user agreement. It's part of the discount brokers model, they charge the rebates from their shorts but do not pass it to the longs. Same with stocks held by ETFs or lower-end prime brokers - they use the borrow rates to juice up their returns.
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Strange.

My discount broker never asked me to lend them my holding except once: Early last year for some reasons they called and asked me to lend one of my small cap stocks and paid ~100% interest rate. Of course they only borrowed for a week. Should add it was a stock with only 10 million shares outstanding, very little insider ownership, high institution ownership and a short of ~15% according to Yahoo Finance.

I should find out what is their practice.
 
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