"if 7,200 of the 8,000 shares available for shorting were lent out, and then all of a sudden 2,000 became unavailable"
Roughly yes, but I don't believe they allow that great of a percentage of the float to be shorted. Short sellers do have shares called back all the time, it is one of the risks of going short.
1. Who besides DTC keeps track of all this stuff?
I'm pretty sure its the individual clearing houses that do the primary tracking. It's them that I ask when I want to borrow to short.
"2. Do brokerage firms have a more or less real time fix (from DTC and other clearinghouses) on the number of shares available to be borrowed?"
My broker updates once a day. If there are 10000 shares of WXYZ to loan when the day starts, that's all they'll lend all day, even if things change.
"3. If the answer to #2 is yes, of course they do, can this information be disclosed by the brokerage to an individual investor?"
That probably depends on your broker and your account balance. The bigger your account, the more likely that you'll be told what you want to know.
4. Is there any reason why changing shares from a margin to a cash account would not reduce the pool of available to borrow?"
I actually don't know the answer to this question. The consensus seems to be that shares held in a cash account aren't available for lending, however, I'm not sure I believe this. Another thing to think about is how Brown & Co says they handle shares. They claim that if your shares are fully paid for they are not available to lend even if kept in a margin account. Perhaps this is something that each individual clearing house decides as a matter of internal policy. It really doesn't affect me that much. I decide whether to buy or sell based on the underlying company and the price of the security.
5. Do you have any insight into the urban myth that placing a GTC limit sell order on shares held in a margin account reduces in any way the borrow pool?
This one is absolute nonsense. It would work if it were a GTC short sale order, assuming your broker will take such an order.
Regards,
Barb |
