GXY (ASX) Banter and General Comments

Originally posted by tutor: ↑

Actually yes. Let me break it down for you as a practitoner of the dark art. Start with 100 shares long...

Under (a) you might sell 50. Your custodian will deliver 50 shares to the buyer and you'll get whatever $ in your bank account 2 days after you trade.

Under (c), you arrange to borrow 50 shares from a lending agent (who acts on behalf of an asset owner, the lender). Once confirmed, you can go as sell 50 shares, which your broker will tag as short. The day after you trade, the lending agent will transfer 50 shares to your custodian and you will deliver some collateral to the lending agent, cash or some other stock you own. Typically, you can expect to lodge $1.05 cash for every $worth of stock borrowed, or $1.15 worth of stock for the same thing. At the second day after you've sold (shorted), your custodian will deliver 50 shares to the buyer and you get the proceeds from the sale. Your number of votes remains 100 and you're obliged to report 50 shares short position to Asic. Your economic exposure here is net 50 long but you have 100 votes at your custodian.

However, although your number of votes remains 100, substantial holdings disclosures are broader than number of votes. Economic or indirect interests are within scope of the disclosure regime, particularly when the exposure is substantially identical (no pun). It also means that substantial holder notices can, in theory, add up to more than 100%. For a quite different example of double counting of substantials, see disclosures by Greencape Capital, an associate of Challenger Group, which lodges its own form contemporaneously.

In relation to the World Mining Fund, by far the dominant holder in BLK, which you can tell from its annual report, in conjuction with its substantial holder notices, it is a long only fund. There are long/short funds managed by that company, but the main holder is not one of them.

If you do this kind of thing for a living, it's easy to forget that most people don't know the mechanics, which i hope this demystifies.

Expand

Borrowed shares remain registered to asset holder as do the votes.
When you borrow shares, they are not registered or transfered into your name.
So when you hold 100 shares and borrow 100 shares, you are physically registering 100 shares to your name.
However, when you sell 100 borrowed shares to a 3rd entity, they are registered into their name (pretty much as new share)

Once you buy shares they still don't go onto your register as they are marked as "return of borrowed stock" and removed from the register.

So no, in the whole process you won't register as having a change in your substantial holding as the borrowed and returned stock was never registered as your holding.

What exactly are you doing for living?

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