Banter and General Comments, page-4371

I can help with this using Blackrock as an example. The World Mining Fund has owned GXY for a while and so it lends out its stock in order to increase returns on its portfolio. Its custodian (one of the custody banks like JPM) administers the lending program. A borrower (usually another bank) asks JPM for availability and quote a borrow fee. The request is typically driven by a customer that wants to short GXY. For example, a hedge fund that uses (say) MS as its prime broker. MS borrows the stock on behalf of its HF customer from JPM. The HF then sells the stock on market. At some point, the HF covers by buying on market and MS can return the stock to JPM or continue to pay the fee to hold the stock in inventory so that another HF customer can borrow without having to go to the effort of sourcing the stock again. In the short reporting stats, lending between JPM and MS would count as gross lending, but not net.

It probably doesn't completely answer things for you, but I hope it gives you the sense that there are more moving parts to this than just Blackrock lending shares to a HF. It also demonstrates that you can have two loans, but just one short trade... MS in the example was a borrower and lender. Any comments questions welcome.