I have read the short position reporting. They do affect the...

I have read the short position reporting. They do affect the price.

Given the tightness of the register - EWI/Chandler/Capital + a few other accounts, that short interest is perhaps 5% - 10% of the free float, but is 10 days trading.

And the shorts are often 20-30% of the days trading.

All shorters are supposed to register with the ASIC - and they publish the "short position" report. That short interest was about 27m this time last year and was covered to about 10m. The same thing happened in september to a lesser degree.

When i last looked there were over 116m shares on loan and 101m borrowed according to the gross loan/borrow reports. They dont match because the coverage is incomplete. They also do not neccessarily equal short positions.

The difference between the net and gross reports is the stock borrowed/lend then lent/borrowed on. The net positons that correspond to the numbers above are 29m net lent, 15m net borrow.

Therefore I need to split out which stock has been lent to/borrowed from participants and which to clients.


All this is in the reports I have bothered to read. But lets actually think about the numbers:

Transaction activities that requiring a stock loan such as an arb, or fails driven do not apply. So the most likely driven is 1. short selling or 2. hedging. There is no arb market that I am aware of and the fail covering market is probably not material.

If the position is an equity swap via a PB then it wont show up in the short report either unless the investment bank transacts. If a short trader position offsets a long position then the bank will not need to hedge and there will be no disclosure. The same effect happens with CFDs and spreadbets. These are contracts that "float" above the actual vesting and ownership of stock (which is the prerequisite for reporting).I certainty do not disclose shorts I take on spreadbet. The spreadbet company then enters the market to hedge their exposure. i see this all the time with EWC where my bets are taken on with no corressponding activity in the actual market.

A bank would not borrow stock to cover this activity as they need exposure to the net price movement to hedge their exposure. They would buy the stock or sell it according to their net position.

It is possible that a margin account requires a stock loan - as the underlaying shares get pledged/lent to the entity providing the loan as part of the collateral, in which case the entity receiving the stock reports a borrow. The client making the loan does not report it (??) nor does the particiant. So a chunk of the borrowing activity might be explained by margin lending.

However I cannot think of a situation where stock would be lent to a client (as opposed to being on-lent to a participant) for anything material but shorting.

There is a threshold under which a short position does not need to be reported - in EWCs case is if a person is short 286,000 shares (at the current price)- so it is quite low and doesnt explain it either.

So I am struggling to reconcile the participants lending and borrowing reports to 1. the short interst and 2. the net loan/borrow.

I am not sure, but I think this means that there is some unreported shorting going on. And this is without accounting for short positions taken by CFDs, Spreads, Swaps etc that are offset against physical long positions held by the entity that provides these services.

if anyone has any thoughts, links etc this would be very helpful. The borrow for shares has to come from somewhere. If an owner makes their shares unavailable for lending then that can choke off the shorting in part. I am pretty sure that HSBC is not lending stock they hold (they hold about 300k of EWI shares, I think the capital account, and perhaps some of chandlers stock)- but citi probably are as that is the holding account for UBS prime broking, and National nominees probably are available for borrow as well (it is the NAB's holding account).

This "analysis" is not complete - and may be a irrelevant. so if anyone has anything to contribute please do.

In the meantime - google eees and wajo or sengkang - foursquare has rolled out in indo and it appears that some people working for BPmigas and EEES are "checking in" and posting a few relitively uninteresting hoto of men in orange overalls, valves and a bed in the working mens camp. ok its not much - but I doubt anyone would bother at all it it was not happening.