[TeMPOraL]

Stock [purchased by] A [lends to] B [shorts to] C [lends to] D [shorts to] E ...

There's one stock, but when people count shorts, they're counting the [shorts to] edges. That 140% ratio is essentially the (amount of [shorts to] edges) / (amount of stock in circulation).

[acd10j]

But Person A etc after lending no longer own stock, as they have lended it. They no longer have possesion of stock, If they now wants to sell their stock they first would need to get it it back from Person B, Which needs it back from Person C etc. Only one person can actually sell stock which is person E, as he has possession of stock. So if there is actual demand of selling a stock a high enough price, So in case person A wants his stock back he will either demand premature cancellation of his lending/leasing of stock, or wait for his lending period to end.

[bluGill]

Person A, and leaves it at the broker. Person B borrows not from person A, but the broker who. Person C buys the stock and again leaves it in the same broker. In the database there is 10 shares to person A, -10 to person B, and 10 to C. If A wants his stock back, then the broker just takes the stock from the pool not from person B.

Since there are a lot of people with stock at the broker there is no problem to shuffle around, it is all the same stock and an entry in the computer.

This of course leads to the real issue: you can buy stock and not leave it with your broker. This has been done, but only rarely (and not in this case)

[newswasboring]

This has been explained to me several times since last week. What nobody mentions is why is it done this way? It just feels unnecessarily obscure. What am I missing?

[dcolkitt]

The simpler alternative to this is the much vilified and misunderstand system of “naked shorting”.

Basically it would allow credit worthy institutions to meet demand by creating synthetic shares out of thin air. As long as they pay all the associated dividends and maintain enough capital to buy back the shares.

That would remove the entire long and convoluted process of locating borrow, and remove much of the market disruptions associated with “short squeezes”

[newswasboring]

or, you know, not allow shorting of borrowed loans which you can report as you owning them.

[TeMPOraL]

(Disclaimer: my expertise in stock trading extends to knowing how to spell "stonk", but I've been reading enough HN and Matt Levine to perhaps be better than a Markov chain at this.)

Why wouldn't it be? It sounds pretty straightforward mechanically. A short means I borrow a share from you and sell it to someone else today, buy it back some time later and give it back to you. That someone else has a bona fide stock, which they can lend to another shorter.

If you mean why the metric of "how many [shorts to] edges are active" is being tracked? I'm guessing it's the best proxy for how confident market is the stock is about to tank. Also, shorting as an abstraction is its own thing, so counting how many shorts there are is as useful as counting any other distinct market activity.