re: huge increase in shares markco
In a short sell the punter needs the price to go down to make money but I think you knew that.
Better facilities are available via brokers such as Terrain Securities which avoid the inconvenience of the ASX official short list.
In their case you sign up with them and provide security in case or approved scrip (I think you need 10% value) and then you are able to short sell any stock that they are able to borrow for you.
As I understand it how this system works is that they borrow the stock from a panel of brokers who may be holding it on longish term arrangements (such as margin loans). You pay the owner a fee for the use of the script and it is transferred to you so that in effect it is actually yours. You can then sell it via your preferred broker and may stay short for as long as a year (again as I understand it) unless of course the owner wants his stock back.
This appears to avoid all the issues of the three days - and I suspect the reporting requirments of the ASX but you would have to check that.
Under this system then you are effectively able to short any stock that Terrain etc are able to borrow stock for which is usually most of the ASX 200, the majority of the ASX 300 and a lot of other stocks outside of that.
The effect.
Well thats the hard bit to work out. From my observations the effect is far more pronounced in smaller stocks than large ones. You might notice the wall of selling that has engulfed smaller stocks having runs such as PTD, TNY, WMT, etc etc where I am reasonably certain that short stock has been available.
Clearly the effect is to vastly increase volatility. But obviously also the shorters have a requirement to cover at some stage so it also provides a likely support to the downside.
Personally I think what is also happening is that this is contributing to further scaring the average punters away who are scared witless by the waves of selling that hit stocks such as these and many others and who are now getting burnt even more than they ever did trying to day trade this when they perhaps are not aware of these facilities and what appears to be their rapidly increasing utilisation.
Is it fair? Well, I suppose one should ask why the institutuions sitting on huge amounts of scrip who have been able to effect such movements using their own scrip to perhaps flush out more cheap shares should have it all to themselves?
The people I do wonder about is - why, if you were a long term holder of the stock, would you lend your stock to soomeone who has no other use for it than to push the share price down? Still thinking about that one.
