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Hi perdant - love the question and I'm no expert but reading the...

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Cabbie

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14/07/18

14:40

Post #: 34345092
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Originally posted by perdant ↑

I wasn't really sure where to put this, or if anyone can even give me the answer i'm looking for ...
Being a Friday night, I wasn't sure how long a post would stay visible on the login board, so I thought this was the least posted on forum and it would stay up longer.

Anyways, I have a question related to the borrowing and lending of shares via ASX ... and I'm confusing myself, perhaps someone can explain it in simple terms?

Say a company has 100 million shares on issue.

I own 10 million shares and someone wants to borrow them all from me for some reason ( ... shorting?).
I charge a fee etc. for this arrangement and loan them my shares.

As a listed 'participant' of loaning and borrowing on the ASX, I upload my loaned shares report (and presumably the borrower does as well, looking at the daily ASX reports) via the ASX Online platform, as is the requirement on the day but at least within the three day lockout.

I loan all 10 million shares I own to person A.

Person A short sells them all on the market and four people buy them, persons W X Y and Z.

My question is:
As the loaner, is my reduced holding balance with the company reflected on their register?
Are the new holders (W, X, Y and Z) increased holding also reflected on the company register?

(Now at this point I'm thinking they should, as otherwise I have increased the shares on issue by 10%)
However, if i've reported the loan via the ASX, does this mean that this temporary increase in shares is an illusion?

Once the shares are paid back, do W, X, Y and Z drop off the register or, if they are purchased from parties other than W, X, Y and Z is this irrelevant?

Yes, I've read all the ASX rules and pages related to borrowing and lending, i'm just thinking it's all just smoke and mirrors for retail investors.

I'm not sure if this is clear, but if you're in the industry you'll probably get where i'm coming from ...

Any responses greatly appreciated.
Perdy

or you can email me at [email protected]

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Hi perdant - love the question and I'm no expert but reading the ASX explanation on the lending of shares it seems the share parcel must end up back in the hands of the original lender sooner or later - i.e. back to the owner.

In the meantime they have been used to cover a short or leverage or hedging or whatever the borrower wanted to achieve.

The list of forms that participants must lodge with the ASX when borrowing shares is mentioned at the bottom of the explanation.

https://www.asx.com.au/services/information-services/what-is-securities-lending.htm

My reading of these is that they report the movement of shares under borrowed conditions but the overall shares on issue do not change (which makes sense) - I suppose hence the reason for the compulsory filling out of the appropriate form. The only impact on the shares due to borrowing mentioned by the ASX is the "directional price movement" if shorted - makes sense as well.

You've probably read all this already but that's my take. No increase in the no. of shares but certainly change of ownership.
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