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Capital Markets

Short selling: NYSE stocks: 25% sold short

Further regulation on delivery needed, says consultant.

Data analysing short sales made on the New York Stock Exchange from February to the end of July this year show that shorting is more significant than anecdotal evidence suggests. About 300 million of 1.16 billion shares traded daily are sold short, reveal the data, put together by Robert Shapiro, chairman of economics consultancy Sonecon and former under secretary of commerce for economic affairs.

Shapiro analysed all trades transacted through the Super Designated Order Turnaround System (SDOT) over a six-month period. The SDOT captures more than 85% of all orders executed on the NYSE. For the purposes of the study, Shapiro excluded closed-end funds and exchange-traded funds.

From February 1 to July 31 the daily short sale ratio for NYSE-listed stocks averaged 25.5%, with monthly averages ranging from 24% in March to 27.2% in July.

“The data show that short sales have become a very pervasive trading strategy,” says Shapiro. “That is quite remarkable. This is not a period in which there is any particular pessimism. Moreover, this sample does not include ETFs, which can have enormous numbers of shorts.”

According to the data, companies with relatively low share prices are more likely to be sold short than companies with relatively high share prices.

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