'tis a big topic ... and would take pages to go into
When a contract is signed to short a stock, it covers all sorts of eventualities, and protects (to a certain extent) both parties. The owner has more power (of course), and can request the return of shares if (say) the price goes up too high. You can only borrow from a broker, and they hold far more shares than you would short, so they will never be short
if an owner wanted to sell. Even if it happened, they would just borrow shares off another insto to cover.
You can't tell your broker not to lend your shares - it is a natural part of their business.
They will tell you it helps liquidity (!), and that they are actually doing you a favour (!!).
The problem with shorting is that it is impossible to police - so the regulators are forced to accept it, and use this "reporting" system give it some legitimacy ... they surround it with "research" about liquidity to justify it. The fact is, used reasonably, without malice, it does do some good. Left to work as it does, it can smash a stock's value if there is not much support and a huge number of shorts are used to force the price down.
There is a pathological hatred amongst retail investors regarding shorting (apart, of course, from those who do it), but it is normally more of a symptom than a cause - although it may exaggerate things at times. The thing to remember is that, whilst a stock is going down, the shorts appear to be winning at your expense. But keep in mind, when it's going up, you're winning at
their expense - and that can be far worse than any long can deliver.
