ShortSimon on Nostr: If something is shorted, then there must necessarily be a long which is the other ...
If something is shorted, then there must necessarily be a long which is the other side of the contract. A short is a bet on the price going downwards and there must be someone on the other side of bet. It is enabled by a broker borrowing the asset from one of their customers (usually without them knowing it) and lending it to the person that wants to sell it in the market.
In order for it to be sold in the market someone has to be buying it. So the short sale means that there are two people that bought the same ETF, the one who bought it in the first place and has lent it to the short seller and the one who has bought it from the short seller. The fiat system allows them to both own the same ETF at the same time.
The short seller could be another retail punter, or they could be the brokerage themselves. By selling you an asset that they have borrowed from another customer, they get some interest free money to play with. They are exposed to the price going up, but they don't have to mark to market.
All of this is enabled by the digitisation of the stock exchange. In the days of paper certificates, people had legal title to their assets and they could hold the share certificate in their own custody. Now they have no choice, but to custody with a broker. As I said, every brokerage account owned by a retail investor does not own the shares. The shares are owned by a nominee company that holds the paper certificates. This structure enables unlimited re-hypothication of assets. They have been doing the same thing with gold for years. That is how there is a 200:1 ratio of paper gold to physical gold. The finanical system is sitting on an enormous short position on the gold price.
In order for it to be sold in the market someone has to be buying it. So the short sale means that there are two people that bought the same ETF, the one who bought it in the first place and has lent it to the short seller and the one who has bought it from the short seller. The fiat system allows them to both own the same ETF at the same time.
The short seller could be another retail punter, or they could be the brokerage themselves. By selling you an asset that they have borrowed from another customer, they get some interest free money to play with. They are exposed to the price going up, but they don't have to mark to market.
All of this is enabled by the digitisation of the stock exchange. In the days of paper certificates, people had legal title to their assets and they could hold the share certificate in their own custody. Now they have no choice, but to custody with a broker. As I said, every brokerage account owned by a retail investor does not own the shares. The shares are owned by a nominee company that holds the paper certificates. This structure enables unlimited re-hypothication of assets. They have been doing the same thing with gold for years. That is how there is a 200:1 ratio of paper gold to physical gold. The finanical system is sitting on an enormous short position on the gold price.