RT Journal Article
SR Electronic
T1 Asymmetries in Short Selling of Exchange-Traded Funds<br/>and the Potential for Systemic Risk
JF The Journal of Index Investing
FD Institutional Investor Journals
SP 74
OP 83
DO 10.3905/jii.2012.2.4.074
VO 2
IS 4
A1 Andrew A. Bogan
A1 Brendan Connor
A1 Thomas R. Bogan
A1 Elizabeth C. Bogan
YR 2012
UL https://pm-research.com/content/2/4/74.abstract
AB Exchange-traded funds (ETFs) have become extremely popular with both investors and short sellers. Asymmetric structural issues occur when an ETF is sold short because the underlying shares in the ETF portfolio are not also sold short. This effectively creates artificial short positions, which are further exacerbated by extensive serial short selling of ETF shares. Several ETFs have short interests greater than 100% of their shares outstanding. Large short interests in many ETFs cause them to behave like fractional reserve stock ownership systems. These practices allow some ETFs to be used to circumvent regulatory rules and create potential systemic risks.TOPICS: Exchange-traded funds and applications, exchanges/markets/clearinghouses, mutual fund performance