skepticus wrote:These posts have been a revelation. Does anyone know how widespread this lending is?
It's an additional money source available to be mined, for holders of publicly traded securities.
Do you object to the idea of making as much money as possible?
finiki, the Canadian financial wiki
“It doesn't matter how beautiful your theory is, it doesn't matter how smart you are. If it doesn't agree with experiment, it's wrong.” [Richard P. Feynman, Nobel prize winner]
skepticus wrote:These posts have been a revelation. Does anyone know how widespread this lending is?
Virtually universal.
I'm not sure why it should be seen as problematic. The key question is really the collateral requirements -- does the fundco/ETF demand 105% coverage for a short sale, settled daily? This is more or less standard.
Take away the short sellers, then you lose a two-sided market (ghariton disagrees with this definition) in which there are bulls and bears. So there's a loss in price discovery.