That is actually quite a viable theory. So processing that...

That is actually quite a viable theory. So processing that thought through my tiny brain... between Vanguard and SS, they hold approx 291mn shares. We know these index funds do tend to lend out their shares for shortselling to earn extra returns since they are usually quite passive with their holdings. So let's assume they are responsible for lending out most of the 205mn shares that have been short sold to date. As you correctly pointed out, the increase in shorts followed STX's inclusion into the XJO. So if and when STX is removed from XJO and they want to sell their holdings, they would require an immediate return of those shares so that they can sell them. It is therefore quite possible that rather than returning the shares to SS and Vanguard, the shorters would simply pay SS and Vanguard and buy the shares off them. This would effectively enable SS and Vanguard to close out their holding while the shorters will cover their short positions.

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