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| | Comments of Alden James on S7-23-03 |
 | | In the case of regular shorting, the DTCC does not even add up all members’ short positions to determine that there are actually shares to borrow, i.e., members are borrowing on already once borrowed shares and in some cases short positions exceed shares available to borrow. |
 | | However, to hedge their naked short positions, the broker dealers, market makers and exchanges permit hedge funds, institutional investors, and foreign investors to add through regular shorting procedures to the members’ naked short positions with a 50% margin further protecting the entire pool of naked short positions. |
 | | It is an anomaly of short selling, though, that when the brokerage house repurchases the shares (i.e., obtains their return from the short-seller),it does not do so at the market price, but rather does so at the contractual price agreed with the short seller (i.e., the market price at the time the securities were loaned). |
| www.sec.gov /rules/proposed/s72303/ajames121103.htm (9087 words) |
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