[asynchrony]

This isn't how short selling works.

If I short a stock, I borrow the share and the sell it on the market. If I loan the share to someone else and they sell it then it is still only sold once.

In my opinion it's more likely that people were either selling naked calls (which would convert into an IOU for stock) or that people were selling shares that didn't actually exist on the open market.

I don't know enough about settlement to verify the latter claim, but there are some reports of shares taking an excessively long time to settle. Those kind of irregularities should probably be more closely investigated.

[klodolph]

> If I short a stock, I borrow the share and the sell it on the market. If I loan the share to someone else and they sell it then it is still only sold once.

The share can then, afterwards, be loaned out and sold again. This causes it to be “double sold” and you’ll see something like the 140%.

Alice loans share to Bob, Bob sells to Carol, Carol loans to David, David sells to Eve.

Bob and David are both short sellers. There is only one stock. It has been sold twice.

[gokhan]

>The share can then, afterwards, be loaned out and sold again.

I've seen the same argument more than once this weekend but this flood [1] (also linked from the TFA) says otherwise:

In order to meet legal requirements, the broker has to find un-lent shares (so the same shares aren’t lent twice). The PB will “tag” those shares, indicate to the client the prevailing cost to borrow, and provide the client a “locate ID” that guarantees that client those shares.

[1] https://twitter.com/compound248/status/1355276755980980225

[grandmczeb]

I think you’re misinterpreting the linked statement - they’re saying A can’t lend the same share to both B and C at the same time. If B borrows the share and then sells to C, C has a share with a clean title and can then lend to D. Otherwise there would be two different prices for lent and unlent shares, since you can make interest off one but not the other.

I’m not 100% sure this is correct though, someone please let me know if I’m wrong.

[klodolph]

That’s interesting… people in that thread have the same questions, but they are not answered. Perhaps we will eventually find out after the SEC investigation… or perhaps someone will just stop by and explain it.

[grandmczeb]

You’re missing the point. The same share can be repeatedly loaned and sold by different people: A lends to B who sells to C who lends to D who sells to E, etc. No one in the chain did any naked short selling.

[ESTheComposer]

This is what I've been reading and lead me (I guess incorrectly?) to believe that there was naked shorting happening