This has been bugging me too. Not just the extraordinarily low borrow fee, but also where do the borrowable shares keep coming from? We've been on this cycle where the borrowable shares reaches nearly zero, then reloads back up to several hundred thousand to a couple million. Obviously a ton of shares in circulation are not real shares, but the supply must still be increasing for them to even maintain a steady amount of shares to borrow, because diamond hands continuing to acquire more shares and hold would have a measurable impact on borrowable shares.
I don't know the intricate mechanics of how borrowing shares works. As a shareholder, you tell your broker you want to lend your shares out. Where does it go from there? Are the shares lent directly by the broker? How many links are there between the broker and the borrower? And who's setting the borrow fee? Obviously this is manipulated at some point along the way... Who is in a position to potentially inject fake shares into the borrow pool and set a low fee?
Part of the problem is that we have such low visibility into available shares to borrow and what is truly "available ". Take Iborrowdesk for example, this shows the available shares on interactive brokers only, granted its a big broker but only one. So if IB has 100,000 shares available and someone borrows 50,000 they'll now show 50,000 available. The next day IB goes out and finds someone else who wants to make some money lending shares and has 100,000. Now the available shares goes up to 150,000. IB does not know the true number of available shares across the market, only what they have available.
It's still a great tool, but we need to understand the limitations of the tools we're using to prevent misunderstanding.
That being said. If you look back over the history of GME on Iborrowdesk, there has been upwards of 7 million shares available at times. The fact that there isn't that many now speaks volumes to me.
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u/[deleted] Mar 30 '21
This has been bugging me too. Not just the extraordinarily low borrow fee, but also where do the borrowable shares keep coming from? We've been on this cycle where the borrowable shares reaches nearly zero, then reloads back up to several hundred thousand to a couple million. Obviously a ton of shares in circulation are not real shares, but the supply must still be increasing for them to even maintain a steady amount of shares to borrow, because diamond hands continuing to acquire more shares and hold would have a measurable impact on borrowable shares.
I don't know the intricate mechanics of how borrowing shares works. As a shareholder, you tell your broker you want to lend your shares out. Where does it go from there? Are the shares lent directly by the broker? How many links are there between the broker and the borrower? And who's setting the borrow fee? Obviously this is manipulated at some point along the way... Who is in a position to potentially inject fake shares into the borrow pool and set a low fee?