RE:Technicalities & markets realities........Acuras
Not too sure what has changed, but the houses, no matter what can borrow shares that you have on margin.
Brokers are to hold your shares in trust except those you bought on margin which may be borrwed at will.
They should be borrowing from their own holdings and if not can borrow from other houses and pay a borrowing fee.
Not sure what has changed in terms of this but quite certain the houses have a way around this. Shorting by instituions is much more liberal as you can see form the 30% of volume that you see reported every 2 weeks.
Acuras1 wrote: About "naked" shorting and the beast it sounds like. How can this happen in the open with little to no regulation (or what appears none at times). Think about how much capital one needs to seriously move the stock down, nearly at will. What if your trader friends go along with you? Here are some thoughts:
You know that hundreds of millions of dollars of retail client shares sit in retail brokerages accounts across the country. Ever notice on your brokerage statements that the shares you own in any company can legally be "borrowed" by the house from clients to serve their institutional "needs"?
All the big players / traders need to do to legally short any given stock in quantity is to have access to a stock position of similar or larger size (whithin the house) than the amount of shares they want to short.
So in the end, they can flush the stock around, sometimes at will. In a really bad market the traders even need to hold back because the "manipulation" would become too obvious.
GLTA