Preventing Lending Your Stocks to Shorts?

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thredge

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#1
So I just read something the other day about preventing your stocks being lent to short sellers.

If you go to the trouble to get certificates, those are yours and can't be lent. But most of us investing with online trading platforms have their stocks held by their brokerage. And reading the fine print, they are allowed to lend your stocks out while they are holding them. This seems a little odd to me, as do a lot of 'shady' finance practices, but its what we are dealing with I guess. It seems odd, because what if all the stock holders decide to sell their shares? Where does your brokerage get them all? Are they allowed to sell off the shorts shares and stiff them for the loss?

So someone recommended putting in a limit sell order for something ridiculous like $1000 per share, and that would prevent your brokerage from being able to lend out your shares to short sellers. Does anyone know if that is actually true? Does having the active sell order prevent them from lending your shares out?
 

garsh

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#2
Interesting!

Personally, I'm happy to lend mine out, and have them manipulate the price downward so I can buy a few more, cheap shares. I really feel that in 3-6 months, the shorts are going to lose the last of the leverage they have to manipulate the stock price, and it's going to make a large jump as they are forced to cover before it goes even higher.
 

Guy Weathersby

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#4
I know that I got a call from E-Trade asking if I wanted to lend shares in one of my stocks, it wasn't Tesla. So I assume their policy is to ask.
 

thredge

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#5
Well, that is kind of comforting that you guys have been asked if you wanted to lend.

I specifically asked the support team at Robinhood if my shares were available for lending and they assured me that they were not.

Dan
I use Robinhood also, and noticed the comment in the fine print that they are allowed to lend it as part of your agreement. I'll have to see if I can find that language again and put a screen grab up here.

When did you ask at Robinhood? Because I only joined about a month ago now, and they said they were hoping to sell short options in the near future, and it appears that they have instituted that on a limited basis now. I think you have to sign up for current access to it.
 

Impatient

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#6
I read that the law changed some years ago and private individuals are not allowed to physically hold the certificates for stocks that they own. I, too, heard that setting a limit order will prevent one's stocks from being lent, but I've never gone online to verify it.