You are viewing the chat in desktop mode. Click here to switch to mobile view.
X
ETF.com Live!
powered byJotCast
Prev Page View Full Chat
Dave Nadig
3:47
Overall, it’s a small number, maybe 20 basis points on the MOST aggressive end of things, maybe a basis point or two more normally.  In terms of its impact on the fund as a whole.  Obviously funds with hard-to-borrow stocks (think solar stocks a few years ago) can make a big number.
3:48
In the end, it all has the effect of helping offset the costs of the fund, so it’s a good thing.
So - is it risky? Well, the person borrowing the stock has to welch on the deal (going bankrupt) and never give you the stock back.
and then, the 104% collateral has to somehow not be enough to buy the stock back in the market.
3:49
SO you have to have two things go wrong at once - a huge intraday run in a stock, and a default.
I’ve never found a single instance where a 40 act fund or ETF has had shareholder-born losses from someone borrowing a stock, and then magically going bankrupt the same day and the collateral not covering the loss.
I actually put this out on twitter a few months ago, and NOBODY could come up with a historical example
It’s theoretically possible, but so are asteroid strikes in central park.
3:50
OK, that's going to wrap it for this week.  We've settled on 3PM thursdays going forward, and you can always ask your questions starting at 9-10AM on the thursday before one of these sessions
We'll have an edited and pretified transcript up shortly.  Thanks for all the questions, and everyone have a great day.
Connecting…