I don't like the hidden trading. There should be a publicly available name on every trade maybe on a 20 minute delay.
What happens if GS lends out my shares to Joe Blow who is selling short, and then the next day I sell my shares? Does GS even know I did this?
Don't stock certificates have a number? Couldn't that be used to ensure no share is double used considering electronic tracking of shares.
I often theorized creating a new exchange that didn't allow bullshit and asking blue chip companies to trade there. You could speculate short through options but that's it. No high frequency trading platforms. Just for investment, just for capital formation. That's where I'd want my companies stock and that's what 99.9% of investors want too IMO.
They would have to cover when the volume simply outstrips the shares they can short.
So theoretically, I think it works something like this...
When Big Bad Wolf Hedge Fund goes to borrow shares from their broker, if the broker doesn't have them, they call around to everyone else to find out who does and what they are willing to lend them out for. So say Goldman Sachs or Merrill Lynches has shares. They lend them out to the broker, hedge fund or person and the shares are then available to short. But what if GS or ML really didn't have the shares? I don't know how they keep their records on that to prove to the SEC that they really had the shares at that time.
So picture this. Maybe today you bought some of those shorted shares. So okay. Probably a ton of us longs have bought shares that were shorted... and maybe we bought some naked short shares. They were sold, and most likely, we bought them. But so long as longs aren't selling, the GS and MLs don't really don't have a problem.
But let's move on to when it becomes a problem for the short.
So guess what happens when the price runs up and a bunch of longs want to take profits? What if a lot of those longs had their shares being borrowed elsewhere? Well of course the broker will sell those shares for the share holder. And those shares were being borrowed (whether they were real or not), the broker that ultimately lent those shares to your broker (if it wasn't your broker that supplied them) will then go to the HF/person that shorted them and say those shares are no longer available. But the short still has their position... only now it is not backed by any shares.
So then the HF/person shorting them has got to get them - AS THOSE SHARES ARE GONE - or the broker will do it for them. And the broker or the HF/person will then have to go buy them on the open market. And with enough demand, the short shares (real or naked) will dry up and all that will be left, for at least that time, are the shares held by all of us, including Woodford, including Cognate, including Meheil, and other angel investors, etc.
Anyway, I think that's roughly how the process would work.
However, I doubt today many of the shorts were correcting. Today I suspect it was probably new investors jumping in - both traders and new longs. So the shorts had to double, then maybe triple down to keep the price from escalating. It'll be interesting to see if the short number jumps up.
In the meantime, I'm really curious where there were 23 million shares to available to buy and sell?
I posted this link to an article that touches on this subject a month or so ago. If you haven't looked at it, and are interested in this subject, please consider reading it.
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