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Friday, February 24, 2012 5:00:39 PM
The M&M has no clue whether it is a short or a normal sell. Shares really do not go from your broker to the M&M's. Accounts (like yours and mine) are either credited or debited money and shares after a transaction.
Lets say you sell 100 shares of AAPL and I am on the other side of that trade with a buy in for 100 shares of AAPL. The M&M that makes the trade sends an electronic debit ticket for 100 shares of AAPL to your broker and sends a credit ticket at the same time for the amount of the sale. The exact opposite is done on my account. No actual shares ever trade hands, only electronic duplicates which change accounts only, never going directly to the M&M. That trade takes 3-4 days to clear and only then is the sell deciphered as a sell or a short. The M&M does not know what type of sell it is. The broker must issue a code to the clearing company denoting the fact that they borrowed shares to sell into the open market. That number is then kept separate and issued every two weeks.
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