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by ferdek 1280 days ago
You can Fail-to-deliver and never locate the stock that you are supposed to borrow. Or you can short ETF with this specific company in basket while going long on anything else in this ETF.

Everything you own, even your own debt, can be used as a collateral by creating and selling swaps.
1 comments
tdees40 1280 days ago
I work in markets. No, you cannot just fail to deliver. I'm also not sure how the ETF thing would work. If it's 1% of the ETF you're going to hedge out the position using a giant notional. It doesn't work.
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ferdek 1280 days ago
Official SEC document regarding regulation SHO describes both illegal and legal cases when you can "just" fail to deliver [0]. Market makers which also happen to have hedge-fund branches are having the most flexibility in this.

[0] https://www.sec.gov/investor/pubs/regsho.htm

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tdees40 1280 days ago
So it may not be illegal in all cases (although it is in many cases), but how does failing to deliver close out a short position?
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