Shorting, page-24

Hi Investor Gadget, I believe your post only provides a partial picture about a broker's ability to short or lend shares for shorting. The description you provided relates to shares acquired via CFDs - if someone buys shares using CFDs they do not own the underlying shares they only have a contract with their broker for the difference in price between when they buy and sell, or sell and buy - the shares that are the subject of the CFD will actually be owned by someone else - either the broker or an entity they have a lending agreement with.

The last bit about the lending agreement is the important bit here. If you buy shares with fully for cash or leveraged but not using CFDs, then the shares are assigned to your HIN and you have all the ownership rights to those shares. Somebody, like a broker, cannot sell or lend those shares to anybody else without first obtaining a lending agreement from you. Otherwise effectively they are stealing them without your knowledge (think of somebody borrowing your car without telling you or getting your permission first).

Therefore the most effective way to prevent shorting is to buy shares not using CFDs but so that you actually own them (leveraged or paid 100%) - those shares will not be shortable unless you give permission to your broker via a lending agreement.

Cheers, Sharks.