I understand what the actual process of doing so is, but for example I’ve seen people who work on wall street try to reassure us that it’s a normal and healthy part of wall street. I don’t understand how it’s allowed, or why any company would allow it to happen to their shares?
In: Economics
So, the people who own the shares that are loaned out receive a fee for loaning the shares, or more likely the broker gets a fee and maybe passes some of it on to the client. It’s a way to earn some passive income.
As to why it’s allowed at all; simply put, people are free to do whatever they want with their shares. They belong to you, after all. This is the same reason why the company whose shares are being sold short allow it to happen; they can’t stop it. The shares don’t belong to them.
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