Tracking short interest

[TSLAopt]

Some strange questions below, but hoping some people with knowledge can help me out...

1. To what extent does the SEC enforce their 'failure to deliver'/naked short-selling rules?

2. In cases of failure to deliver, the National Securities Clearing Corporation (NSCC) -- the clearing house that settles most trades in the US -- can step in, purchase shares on the open market and deliver the shares themselves, then bill the seller for the cost + an additional fee, correct?

3. If played by the rules, when shares are shorted, the shares must be borrowed from somewhere. Either the broker must have them available, borrow additional shares from somewhere else for a fee, or not permit the client's order (correct?).

4. When the loaner of the borrowed shares wants to sell their shares, or have them delivered in physical certificate form, the shares must be returned by the borrower (shorter), correct?

5. So, in theory, could a bunch of long-term investors converting their shares to physical certificates cause a short squeeze? As I understand this SEC page, physical stock certificates cannot be used as collateral by your broker (unless you want to apply them as collateral?). So, I assume they would no longer be able to loan out those shares.

6. Would the same thing happen if you just moved your shares from a margin account to a cash account? Can the broker loan your shares out if they are in a cash account?

Much thanks in advance to anyone who can answer these questions. :smile:

Good questions...Ill take a stab at some of these

1)I would say to a reasonable extent but that many brokers still have leeway or loopholes they can justify to go against it in certain cases or perhaps for certain large PB clients of theirs.

2)not 100% sure on this

3)or if the client indicates they have located the shares somewhere else a broker will let them short it. I'm not sure there is any real way the broker can make sure the client is telling the truth other than buying them in on T+3 when the trade settles if the locate isn't there. There are also other loopholes I think institutional Prime Brokers can exploit for their billion dollar hedge fund clients that I don't know all the details of but can involve SWAPs and market makers providing liquidity of the SWAPs do naked shorting the stock in turn to hedge themselves (ie. market makers I don't believe have to find a locate in order to short if they are doing so to provide a liquid market or bid/offer).

4)I believe so.

5)perhaps, but remember point 3 above

6)theoretically yes. I also think that if you are in a margin acct but not using any margin then the broker is not supposed to loan out (aka rehypothecate) any of your shares without your permission. I think the broker is only allowed to loan out your shares if you are actually borrowing cash on margin in which case they are allowed. To lend out your shares bc they are helping to finance them.

I suspect its possible that some brokers may try to embed, somewhere in their customer agreement, their ability to rehypothecate your shares even if you are not borrowing cash.

Also keep in mind there can theoretically be an infinite amount of shorting. If there are 100mm share outstanding and 100mm shares are then lent out to short, then those shorts will sell those 100mm shares to more longs who also have the ability to lend out their shares. If they all did too then it would be 200mm shares sold short on a stock with only 100mm shares outstanding.

 

[vin5xxx]

There is going to be a major reduction in shorted shares when we see the 1/15/14 snapshot. My guess is the shorts continue to cover into tomorrow.

 

[TSLAopt]

There is going to be a major reduction in shorted shares when we see the 1/15/14 snapshot. My guess is the shorts continue to cover into tomorrow.

Actually there won't be a major reduction on that even if there was a ton of short covering today. That is because it is settled short positions as of 1/15/14 and because US stocks take 3 business days to settle from trade date what you will see is the short position as of end of day on Friday Jan 10th. I use to work in US equity settlements at a major investment bank so I know this for fact and still work in finance and know it still takes 3 business days for a US equity to settle from trade date.

unfortunately we won't really get a good indication how much short covering is going on until the report after that one.

 

[vin5xxx]

TSLAopt - Thanks for clarifying. I understand 3 day settlement but did not realize the short updates took that into account.

 

[DaveT]

Short interest as of 1/15/14 (settled date) was published today (Tesla Motors, Inc. (TSLA) Short Interest - NASDAQ.com). Since it takes 3 business days to settle, the 1/15/14 settled date is reflective of short interest as the end of trading on 1/10/14.

So as of 1/10/14, 31.31m out of 84.11m shares of the float were short OR 37.2% of the float was short.

Settlement Date	Short Interest	Avg Daily Share Volume	Days To Cover	Stock price (3 days before settlement date)
1/15/2014	31,312,745	9,460,222	3.309938	145.72
12/31/2013	31,648,868	7,752,710	4.082297	155.50
12/13/2013	30,343,842	11,309,668	2.683000	142.19
11/29/2013	29,155,653	14,276,160	2.042262	120.84
11/15/2013	25,390,455	16,974,121	1.495833	137.80
10/31/2013	21,419,497	9,851,553	2.174225	162.86

 

[Mario Kadastik]

It seems that now that my portfolio has grown enough I can see which stocks are shortable and what rate. Out of curiosity on my IB account I checked TSLA and it's listed as 437k shares are available to short and the interest rate is 1%. Just as a data point. Doesn't look too high rate and plenty of shares so probably the short interest has come down A LOT now that we're knocking on $200...

 

[AlMc]

It seems that now that my portfolio has grown enough I can see which stocks are shortable and what rate. Out of curiosity on my IB account I checked TSLA and it's listed as 437k shares are available to short and the interest rate is 1%. Just as a data point. Doesn't look too high rate and plenty of shares so probably the short interest has come down A LOT now that we're knocking on $200...

While we do not know how many short positions are present today, we will have the 1/31/14 short interest numbers released after market close tomorrow.

 

[Chickenlittle]

While we do not know how many short positions are present today, we will have the 1/31/14 short interest numbers released after market close tomorrow.

nice thing is that the shorts dont seem to learn. they go back in at the higher price. they believe their mistake to be shorting at wrong price not just shorting.

 

[DaveT]

Short interest for 1/31/14 settlement date comes out after close of market today. Let's see who's guess is the closest.

I'll go first. I'll guess 29.7m shares short.

 

[Larken]

I'll say 24,6 million.

 

[kenliles]

I'll go at an even 28m

 

[AlMc]

30.1 (have not learned yet not to short TSLA)

 

[InTheShadows]

Just a shot in the dark. 21.2m

 

[772]

I don't think it will change that much, 31.1m here

 

[surfside]

i'm going to guess 27 million shares short

surfside

 

[DaveT]

Short interest as of 1/31/14 (settled date) was published today (Tesla Motors, Inc. (TSLA) Short Interest - NASDAQ.com). Since it takes 3 business days to settle, the 1/31/14 settled date is reflective of short interest as the end of trading on 1/28/14.

So as of 1/28/14, 29.64m out of 84.17m shares of the float were short OR 35.2% of the float was short.

Settlement Date	Short Interest	Avg Daily Share Volume	Days To Cover	Stock price (3 days before settlement date)
1/31/2014	29,639,877	8,094,761	3.661612	178.38
1/15/2014	31,312,745	9,460,222	3.309938	145.72
12/31/2013	31,648,868	7,752,710	4.082297	155.50
12/13/2013	30,343,842	11,309,668	2.683000	142.19
11/29/2013	29,155,653	14,276,160	2.042262	120.84
11/15/2013	25,390,455	16,974,121	1.495833	137.80

 

[Larken]

Wow you nailed it with you 29.7 guess DaveT! Nice guess I'm happily surprised short interest remains this high still.

 

[DaveT]

Wow you nailed it with you 29.7 guess DaveT! Nice guess

Seriously crazy guess.

 

[Robert.Boston]

Seriously crazy guess.

He went over, so under Price Is Right rules, @surfside's 27 million wins. ;-) Seriously, that's some amazing guess work, Dave. It's a pity there's no way to track the price at which these shorts sold.

 

[surfside]

He went over, so under Price Is Right rules, @surfside's 27 million wins. ;-)

wooooohooooooo!!!

congrats DaveT -- impressive guess

i'm certainly surprised it is that high given TSLA closed at $178 on the 28th; i would have guessed that a fair bit more of the shorts had closed their positions by that time.

i guess this means we have more squeeze to come!!

surfside