ETF Short Interest and Failures-to-Deliver: Naked Short-Selling or Operational Shorting?
Richard B. Evans, Rabih Moussawi, Michael S. Pagano, John Sedunov
Darden Business School, 3 May 2017
We identify an alternative source of ETF shorting related to the market maker liquidity provision and creation/redemption activities. This “operational shorting” arises due to a regulatory exemption, allowing ETF market makers to satisfy excess demand in secondary markets by selling ETF shares that have not yet been created.
PDF (79 pages): ETF Short Interest and Failures-to-Deliver: Naked Short-Selling or Operational Shorting?
