RE: Investor relations responce1 Dec 2021 20:19
^^ People who always criticise lending stock take note.
As many others have pointed out in the past, lending stock is a perfectly acceptable and has a number of uses beyond lending liquidity to the market. Banks often offset their risk by taking out shorts in a number of assets. Very little shorting activity is speculative. Some clients of investment banks often want long/short exposure to a given asset. This can be structured in such a way that the client gets the long/short exposure and the bank is left with the short/long exposure. In order to offset the risk the bank has taken on, they will in turn take out some long/short exposure to net it all off. These types of deals are often set up in complex derivative structures to transfer the risk from one party to another. The bank will take a small commission for enacting this but the risk is neutral for them.
Not as exiting as Christian Bale taking on Wall Street but there you go.
If you do find it interesting, take a look at any investment banks financial statements. You will find this activity disclosed in their activities. They usually include financial instrument disclosures too, which show their long/short positions across assets (equity, debt, derivatives etc.).