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I believe I've heard (don't remember where and don't remember how reliable
the source was) that broker's like Datek have contracts with large mutual
funds like Janus, Fidelity, etc to borrow stock so the broker's customers
can short it when needed.
But getting back to the original point, I saw on CNBC's Street Signs, Ted
David was getting some flak in his email that people were having trouble
shorting. This was Wednesday or so. He brought it up in a conversation
with Art Cashin. Cashin said that if Ted gave him some specific names, he
would dig around on the floor and see if he could find out what the deal
was, but they never got back to it that I saw.
Kent
----- Original Message -----
From: "Infernal Elk" <infernalelk@xxxxxxxxxxxxxxxx>
To: <realtraders@xxxxxxxxxxxxxxx>
Sent: Sunday, October 07, 2001 2:47 AM
Subject: Re: [RT] VERY HEAVY BLK activity ON MSFT
>> NW: No, they are loaning the stock so they can earn the stock loan fees
such
>> as interest on the credit balance. This source of income often exceeds
the
>> commission end of the biz. Given the recent deep discounts on stock
>> commissions, I am sure the stock loan fees and interest they rip off
from
>> the public is more important than ever as a source of income.
<unlurk>
having worked in back offices on & off in the past, i have to say that
stock loan (equities) & repos ("fixed" income) can be a *substantial*
source of financing at relatively little risk to a large firm,
depending on the sophisication of the software systems that enable the
stock loan or repo desks (stock loans are essentially equity "repos")
to manage the huge volumes of stock in & out of the firm's box hourly.
some of the stock loan desks i have seen rival some proprietary
trading desks in number of personnel. and the stock loan folks are
just as busy, sometimes busier!!!
it's not as sexy as the proprietary side, but in bad years, the stock
loan & repo desks subsidize the proprietary traders' bonus pools -- no
joke! i've seen it happen often enough at bonus time. stock loan is
steady money.
- *lk
<relurk>
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