>>I short your holdings and sell them to BOP (keep the IQ) that means I have two account that I can use to to hedge.
3 days I have to cover yours so I short BOP's holdings and cover yours. Opps in three days BOP's comes due so I short yours again and cover BOP's ...
Stop right there. The market is basically anonymous. I have no idea if I am buying shorted stock, if it's being sold to me from Africa, or what brokerage house is selling it to me. (Unless of course I am using an ECN and selecting blocks from certain market makers that represent a brokerage house.)
But the point is this -- Gary (DLJ client) has to sell to another DLJ client everytime in order to do the rolling short and cover, cover to short continuously. Otherwise, you run out of brokerage house stock to short against. The chances of always selling to someone with the same broker is you are highly unlikely.
Which is why it doesn't happen with normal traders. But with market makers and offshore naked shorting in the OTCBB, you bet it does.
MB
