RE: Limit sell orders, help please23 Feb 2024 17:52
Just because you place a limit sell, it doesn’t mean you’re shares are ring fenced and can’t be lent out. Whilst nominally shares are allocated to an account owner, in reality, they are held as a single position by the custodian bank.
They just reconcile all long and short positions to get to a net position, whether that be long or short. Given the trading cycle, if the custodian needs to recall the shares, the shorter has plenty of opportunity to buy the shares in the market.
Should they fail to return the shares in time to settle their position, there are multiple options available to the custodian, including but not limited to borrowing from another broker/custodian and purchasing the shares themselves. All result in greater exposure and cost to the shorter.