Stock lending racket exposed: Retirees at risk after $1bn Crash
(29 Mar 08) The controversial share market practice of "stock lending" has spectacularly imploded, with the $1billion-plus collapse of a stockbroking firm, threatening millions of dollars worth of Australian retirees' superannuation savings.
“....Melbourne-based Opes Prime - a significant provider of margin loans for investors to buy shares - has been put into administration amid accusations of financial irregularities. ANZ and investment bank Merrill Lynch, which lent $1billion to Opes, yesterday began dumping shares held by Opes on customers' behalf as they sought to recoup their loans. It is thought that customers could lose between $200million and $300million from the fire sale, with some shares being sold at half of current market prices..... Opes's business model involved lending money for people to take out margin loans to buy shares. Those shares were then transferred to Opes, which lent them to traders such as hedge funds to play the stock market...” Stock lending racket exposed: Retirees at risk after $1bn Crash “...Such deals do not have to be disclosed, helping traders engage in practices such as short-selling, a technique that has been used to drive shares in companies such as ABC Learning Centres and Allco Finance Group sharply lower. To boost its $1.5billion securities lending business, Opes borrowed shares from custodian companies....The banks have taken control of Opes's $1.5billion securities lending book and began selling stock at wholesale prices. These included a parcel of 10.79 million shares in Hedley Group sold at half price less than two hours before the pubs business was placed in a trading halt at 11.27am yesterday. It is not known if the two matters are related. Other stocks that were dumped at a discount include retailer Just Group, which was sold at $1-a-share less than its market value....”
“lending” and “borrowing” of shares
(26 Mar 08) For the many people who have phoned on and off air, and emailed concerning the “lending” and “borrowing” of shares, as featured in some new outlets recently, these stories from the Australian may help shed some light . Traders Plunder Super , Super fund ceases share lending and Market cowboys reined in
And from the website Business Spectator, theses article may also be of interest, Investors must fight back , Robert Gottliebsen, Who's on the short list? By Alan Kohler
To help you wade through this material this link may also help Margin loans and short selling explained