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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: saveslivesbyday who wrote (136692)7/26/2008 2:03:03 PM
From: The VetRead Replies (2) of 306849
 
"Brokers can loan a share of stock out of its customer account to be sold short over and over"

I really don't think so. At least I know that's not how they do business at Schwab.

How can they know? How can it be prevented under the present rules? Every share doesn't come with a tag saying "I was borrowed from XYZ and lent to ABC" before being sold short to you... And you don't know if your broker lends that stock again to another short seller to be sold again either.

If you have a margin account with SchWab (or anyone else for that matter) and you buy a stock on the market that was sourced from any other broker, there is no way that you or Schwab knows if that buy came from a long shareholder who owned the stock or from a short seller who may or may not have borrowed it from somewhere else.

If Schwab now lend your "long" stock to another short seller it can be sold again and in effect the same stock has been "borrowed" twice and sold twice. This can continue indefinitely with the same parcel of stock being borrowed, sold, bought resold etc. over and over again. In all cases the stock apparently existed and was available to be "borrowed legally" in each account that it passes through but in effect there are multiple owners for each share traded.
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