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Strategies & Market Trends : Bob Brinker: Market Savant & Radio Host -- Ignore unavailable to you. Want to Upgrade?

To: MrGreenJeans who wrote (8524)	10/23/1998 10:06:00 PM
From: Jim S	Read Replies (1) \| Respond to of 42834

Mr GJ: Good explanation of the front half of the SPY split question. The back half rounds out why SPY can't split: S&P Depository Receipts (SPDRs) are a derivative instrument. As an example, suppose you short a stock; the shares you short don't actually change hands, and the person you borrow the shares from never even knows that you borrowed the shares to sell. It is an exercise in book keeping and computer transfers. Similarly, the SPDRs are "IOUs" on deposit in an account somewhere, not the actual shares themselves. So, for SPY to split, it would require a doubling of the IOUs (at half the price) of nonexistent S&P shares in a nonexistent depository account. Furthermore, all of the S&P 500 issues would have to make a simultainious split. Kinda boggles my mind to think about it too much. Ever notice how the simple questions always turn out to be the hardest to explain? jim