Do you make use of securities lending?
" There are two basic reasons for borrowing: one is to receive a tax advantage on the dividends, which we cannot get, and the other one is to short. "
The managers note 2 motivations of those who borrow... a dividend capture strategy and short selling...
clearly they are aware of the risk to short sellers but re-engage in securities lending regardless.
Note to self.. research this tax thing... If its a tax thing then they are essentially sharing in the tax adv by lending it to those with the adv....
another point has to do with timing the market ...
"But since the financial crisis, demand for borrowing stocks, particularly in order to short, has cooled down although we believe it might pick up again."
so we have recognition that there may be "safer" periods to loan out stock when short sellers aren't behind the borrowing...
surely there could be closer arrangements made between lending securities out and preventing the sales of the securities by the person who borrows it.
By retinkering the contracts one should be able to limit the lending to the tax shelter folks and not the short sellers. I think its a failure of the institutions in not playing a stronger hand " you want my stock you gotta hold it" and setup the infrastructure to enforce it (IE NO CHEATING POSSIBLE).
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