Understanding short interest and securities lending data: A guide for investors

Short interest and securities lending data are essential tools for investment managers. These datasets help track market-wide short-selling activity and identify stocks under downward pressure. By analysing this data, investors can make more informed decisions when taking short positions.

What is securities lending?

Securities lending is the temporary transfer of securities from one party to another, with the borrower agreeing to return them later. The primary driver for securities lending is to facilitate short sales. Lenders benefit from lending fees, while borrowers aim to profit from the falling price of the stock.

Key participants in securities lending include market makers, prime brokers and investment managers. This market has grown significantly, prompting regulators worldwide to introduce disclosure rules to improve transparency and mitigate risk.

Regulations and disclosures

As securities lending is considered a materially significant source of information, regulators have implemented distinct short-selling disclosure requirements to make information public and accessible. Investors involved in securities lending or shorting activity typically report positions when they exceed certain thresholds. Depending on the region, disclosures may be submitted privately to regulators, made public or both. Regulatory authorities often publish aggregated short-position reports at the security level, while some jurisdictions provide investor-level position data.

Exchange-published data

Exchanges provide short interest reports that allow investors to monitor short-selling activity. These reports commonly include data points such as:

- The settlement date

- The issue name and symbol

- The market traded in

- The current short interest

Some exchanges offer more granular insights, including short interest history, daily share volume, days to cover and short sale transactions. Such data helps investors estimate the risk of short squeezes and track trends over time.

Securities lending data for deeper insights

While exchange and regulatory data offer a high-level view, granular securities lending data is necessary for detailed analysis. Key metrics include:

- Short interest: The number of shares sold short relative to shares outstanding

- Utilisation rate: Percentage of lendable shares currently on loan

- Inventory: Shares available for lending, signalling demand for short selling

- Lending fees/borrowing costs: Costs for borrowing securities, indicating scarcity or demand

- Settlement fail rates: Failed transactions that may signal market stress

- Loan tenures: Duration of securities on loan, reflecting market sentiment

- Days to cover: Time needed to close short positions, crucial for short squeeze predictions

Compiling these data points often requires agreement-level information from brokers and investors. Leading platforms aggregate and normalise this data to provide intra-day or daily updates, helping investment managers benchmark lending terms and monitor market dynamics.

Complementary datasets

Securities lending and short interest data are often combined with other datasets to enhance investment strategies. These include stock return metrics, news and sentiment data, ESG indicators and derivative analytics. By linking these datasets, investors can better predict stock movements, manage risk and optimise short-selling strategies.

Conclusion

Short interest data, securities lending data and short-selling data provide critical insight into market behaviour and investment opportunities. For investment managers seeking to leverage these datasets effectively, understanding granular metrics and regulatory reporting is key.

To explore Neudata’s detailed research into short interest data and the securities lending data, register for a demo with our team today.

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