Quote from mskl:
This exchange has a product that could take off if they were to market it properly. Just take a look at all the people who are bullish in todays market and love some of these hard to borrow names. They are offered at discounts in the SSF market or would constantly trade at these discounts via SSF's yet the Exchange doesn't market this to the investment community. Instead they focus on trying to get the individual to trade the common names at bad prices (spreads) or develop products (1D) taking one element out of the equation making the product closer to an equity security. Or they market the "tax" advantages of their products and how investors can "arb" the tax man. Take note of the open interest in Canadian securities. This tax arb won't last - someone will figure it out and expose these traders (Cdn banks etc)
This exchange will close if they don't use their niche to "take" part of the securities lending market.
First thing that should be done is all the HTB names should be listed on the exchange. Then an active market should be established based on the securities lending rates - thus many SSF's would be offered at a discount where the bulls would have a field day buying the securities they love at lower prices. Some HTB names would then be shortable to the Bears with no risk of spiking lending rates and potential buy-ins.
Seems obvious to me....
I agree. SSFs are a brilliant idea because they do away with all the nonsense that gets people pissed off because you are borrowing shares from someone else to sell (how unpatriotic) and as a result lead to this regulatory nightmare of buyins, no shares available, sky high borrow rates. SSFs could be a big market if they had more names and better liquidity.
Sometimes I want to buy a hard to borrow stock at a discount but the SSF market maker won't let me and will have abusive asks on the spread. There is pretty much nobody in these things except for the market makers