brokers need to enter agreements with counterparties to borrow stock. Having a larger balance sheet and larger outstanding stock loan balance helps firms enter into agreements with the larger banks and trust firms. FWIW, at IB we're always looking into increasing the stocks available on our short list and this includes sourcing some of the hard to borrows. I won't provide any further details now but expect some good news on this front down the line....
The higher rate applies to borrow it the first time. The reduced rate applies if you hold it overnight or borrow it again within 3 days I think. I never bothered to figure out the exact details, as I rarely hold those positions overnight, and it's not something I do much. Assent's short list has been fine for me. I trade mostly big caps, and they're almost all available, the exceptions generally being the ones that are tough to borrow everywhere.
If you use a broker dealer which has clearing through say Goldman or Merrill, which i presume are the best in terms of short availability, are there still a lot of stocks that simply cannot be shorted with these firms (cant even be located for you at all)? Any estimate? Whats been people's experiences, how many times were you told it cant be located?
i don't understand the attitude that you and some others share. If something is diifficult to locate why shouldn't you be asked to pay a high price from both the lender and the prop shop.
Funny I have a sizeable account with Carlin and clear through Goldman and I must call and then MAYBE REPEAT MAYBE get the short. I have another account PROP that I can short anything yes ANYTHING on the fly interday. This has helped me so much its unbeleivable. If i want to hold overnight I must ask.If anyone is interested in knowing where to short anything interday just PM me. MOMO
the reason momo can short anything is the clearing firm is different than the software firm. so the software firm is allowing you to short what you want then sending the trades to the clearing firm after hrs. the clearing firm just matches up the trades that level each other out with no overnights so they never catch one is illegally shorting unshortable sho stocks. the reason he must ask to holdovernight is the clearing firm will have to legally borrow a overnight position. i've seen other smaller software vensors do this. REPEAT THIS IS ILLEGAL AND WHEN CAUGHT YOU THE TRADER ARE RESPONSIBLE EVEN THOUGH YOU'RE BEING ALLOWED TO SHORT UNSHORTABLE STOCKS. LOOK AT TRADESTATION THIS WEEK UNDER INVESTIGATION FOR ALLOWING NAKED SHORT SELLING. THE SEC IS COMING DOWN HARD
Thanks to all posters. Thats interesting bighitter1, maybe we should be asking which firms currently allow intraday naked shorting too?! Why bother with determining the size of a short list when you can sign up to short anything under the sun intraday... well hopefully momo trader99 will tell us what software/clearing combination he has.. If Tradestation is being investigated, doesnt that mean that they are being held responsible for the naked shorting offences. Can you provide any proof that the trader is held responsible in such a situation? It doesnt make sense, because if my software tells me i can short a given stock, and it turns out to be a naked short, i shouldnt be held accountable for that!
It certain cases, a larger clearing firm has a Long position "somewhere within the firm", they skirt the legal issue of naked shorting by showing inventory. As long as the position is not held short overnight, nobody get's caught. The software sees a long position elsewhere in house and therefore allows a "long sale" even though the trader selling it, does not own it. This is done all over the place. Bullets were done away with because the SEC realized it was creating Synthetic Shorts. I bet you thought IPO's were not shortable on day one!
Surdo interesting post. I agree partly with what you said about having inventory "somewhre in the firm" but I think it would be at the firm level not the clearing firm level. By this I mean, prop firms might actually hold long stock and permit traders in that firm to use it to short and hit downticks (for a fee of course or just the mere fact that it generates volume). I don't think however that the clearing firms would do that. For what reason? They would get fined so heavily. I would be floored if detecting such activity would be harder than pulling up a time and sales report coupled with some form of query in a clearing firms position database. We would like to think of govt' institutions are inept but they are NOT that stupid specially when it comes to revenue raising activities (i.e. fines) for Uncle Sam.