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Bloomberg

Biggest Players in the Short-Selling Game Are Getting a Pass

(Bloomberg) — It’s in the air again, on Reddit, in Congress, in the C-suite: Hedge funds that get rich off short-selling are the enemy. The odd thing is, the biggest players in the game are getting a pass.Those would be the asset managers, pension plans and sovereign wealth funds that provide the vast majority of securities used to take bearish positions. Without the likes of BlackRock Inc. and State Street Corp., the California Public Employees’ Retirement System and the Kuwait Investment Authority filling such an elemental role, investors such as Gabe Plotkin, whose Melvin Capital Management became a piñata for day traders in the GameStop Corp. saga, wouldn’t have shares to sell short.“Anytime we short a stock, we locate a borrow,” Plotkin said Feb. 18 at the House Financial Services Committee hearing on the GameStop short squeeze.There’s plenty to choose from. As of mid-2020, some $24 trillion of stocks and bonds were available for such borrowing, with $1.2 trillion in shares — equal to a third of all hedge-fund assets — actually out on loan, according to the International Securities Lending Association.It’s a situation that on the surface defies logic. Given the popular belief that short sellers create unjustified losses in some stocks, why would shareholders want to supply the ammunition for attacks against their investments? The explanation is fairly straight forward: By loaning out securities for a small fee plus interest, they can generate extra income that boosts returns. That’s key in an industry where fund managers are paid to beat benchmarks and especially valuable in a world of low yields.The trade-off is simple: For investors with large, diversified portfolios, a single stock plummeting under the weight of a short-selling campaign has little impact over the long run. And in the nearer term, the greater the number of aggregate bets against a stock — the so-called short interest — the higher the fee a lender can charge.In the case of GameStop, short interest was unusually high and shares on loan were generating an annualized return of 25% to 30%, Ken Griffin testified at the Feb. 18 hearing. Griffin operates a market maker, Citadel Securities, as well as Citadel, one of the world’s largest hedge funds.“Securities lending is a way for long holders to generate additional alpha,” said Nancy Allen of DataLend, which compiles data on securities financing. “Originally, it was a way to cover costs, but over the last 10 to 15 years it’s become an investment function.”Not everyone is comfortable with the inherent conflict. In December 2019, Japan’s $1.6 trillion Government Pension Investment Fund stopped lending its international stock holdings to short sellers, calling the practice inconsistent with its responsibilities as a fiduciary. At the time, the decision cost GPIF about $100 million a year in lost revenue.The U.S. Securities and Exchange Commission has regulated short-selling since the 1930s and polices the market for abuses such as naked shorting, which involves taking a short position without borrowing shares. Proponents of legal shorting argue that its use enhances liquidity, improves pricing and serves a critical role as a bulwark against fraud and hype.Chief executives, whose pay packages often depend on share performance, routinely decry short sellers as vultures. More recently, shorting has come under fire in the emotionally charged banter on Reddit’s WallStreetBets forum. Some speculators ran up the prices of GameStop, AMC Entertainment Holdings Inc. and other meme stocks in January to punish the hedge funds that bet against them, and they delighted when the rampant buying led to bruising losses at Melvin, Maplelane Capital and Citron Research.Many of the key actors in the GameStop frenzy testified at the Feb. 18 hearing. Plotkin was grilled by committee members over Melvin’s short position. Citadel’s Griffin and others faced broader questions about short-selling. Yet no one asked about the supply of borrowed shares and there were no witnesses called from the securities-lending industry.There’s a symbiotic relationship between hedge funds and the prime-brokerage units of Wall Street firms, much of it built on securities lending. Prime brokers act as intermediaries, sourcing stocks and bonds for borrowers who want to short them and facilitate the trades. According to DataLend, securities lending generated $2.9 billion of broker-to-broker revenue in 2020, almost the same as in 2019.Demand for short positions was already expected to drop as stock prices surged to all-time highs. Now, with the threat of retribution from the Reddit crowd, it may weaken even further. Griffin said he has “no doubt” there’ll be less short-selling as a consequence of the GameStop squeeze.“I think the whole industry will have to adapt,” Plotkin said at the hearing. “I don’t think investors like myself want to be susceptible to these types of dynamics.”This could not only threaten the dealers who broker stock lending but also the holders who supply the securities and share in the revenue. They reaped $7.7 billion globally in 2020, down from a record of almost $10 billion in 2018, according to DataLend. Lending fees increased by 4.2% on a year-over-year basis in February after the GameStop onslaught, DataLend says.While securities lending accounted for $652 million, or just 4%, of BlackRock’s revenue in the fourth quarter of 2020, there’s little cost involved and the risks are low because borrowers have to put up collateral that equals or exceeds the value of the loan. At both BlackRock and State Street Corp., the second-largest custody bank, the value of securities on loan as of Dec. 31 jumped at least 20% from a year earlier, to $352 billion and $441 billion, respectively.“Every little bit counts with indexes,” said John Rekenthaler, vice president of research at Morningstar. “You’re scraping nickels off the street, but there’s a whole lot of nickels.”Others could take a hit, too. Just as Robinhood Markets is able to offer zero-commission trades by selling its order flow to Citadel and other market makers, asset managers typically pass on some of their securities-lending revenue as a type of client rebate.“It’s very important to remember that institutional investors earn substantial returns from participating in the securities-lending market,” Citadel’s Griffin said at the GameStop hearing. “That accrues to the benefit of pension plans, of ETFs, of other pools of institutional lending that participate in the securities lending market.”(Adds data on lending fees after the short-interest chart.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

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Applications open for Pattison Media 2021 Prairie Equity Scholarship – Lethbridge News Now

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(Lethbridge News Now)

By Pattison Media

Apr 19, 2021 12:01 PM

LETHBRIDGE, AB – Applications are now being accepted for Pattison Media’s 2021 Prairie Equity Scholarship competition.

The scholarship is aimed at broadcast and digital media students in the Prairie provinces who are part of under-represented groups.

Two awards of $2,000 will be made to residents of Alberta, Saskatchewan, or Manitoba who in 2021 are attending or planning to attend a recognized broadcast or digital media program at a post-secondary institute in one of the three provinces.

Information and application package

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‘Godzilla vs. Kong’ Tops Box Office Again, Crosses $80 Million in the U.S.

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OTTAWA (Reuters) – Canada will set aside C$12 billion ($9.6 billion) to extend its main pandemic support measures in a budget to be presented on Monday, the Toronto Star reported, as much of the country battles a virulent third wave of COVID-19 infections.

The emergency wage subsidy and the emergency rent subsidy, due to expire in June, will be extended to the end of September, the Star reported on Sunday.

Separately, the government will create the “Canada Recovery Hiring Program” in June meant to help those companies depending on the wage subsidy to pivot to hiring again, the newspaper said.

The Finance Ministry declined to confirm or comment on the report. However, Environment Minister Jonathan Wilkinson told the Canadian Broadcasting Corp on Sunday that government pandemic supports would continue for as long as needed.

“If Canadians need that support and the pandemic continues, the government will certainly have their backs,” Wilkinson said.

Wilkinson also confirmed that the budget would be “ambitious” and that the government would “invest for jobs and growth to rebuild this economy,” though he also said there would be “fiscal guardrails” to put spending on a “sustainable track”.

Finance Minister Chrystia Freeland will present the country’s first budget in two years on Monday after promising in November up to C$100 billion in stimulus over three years to “jump-start” an economic recovery during what is likely to be an election year.

Canada has been ramping up its vaccination campaign but still has a smaller percentage of its population inoculated than dozens of other countries, including the United States and Britain.

Amid a spiking third wave of infections, Ontario, Canada‘s most populous province, announced new public health restrictions on Friday, including closing the province’s borders to domestic travelers.

($1 = 1.2501 Canadian dollars)

 

(Reporting by Steve Scherer, Editing by Nick Zieminski)

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GLAAD Media Awards presenters support transgender athletes

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LOS ANGELES — “Schitt’s Creek” and “The Boys in the Band” were winners at the GLAAD Media Awards, which included soccer’s Ashlyn Harris and Ali Krieger calling for transgender students to be accepted as “part of the team” in sports.

Harris and Krieger, spouses who play for the Orlando Pride and were on the 2019 World Cup-winning U.S. women’s national team, presented an award in Thursday’s virtual ceremony to the film “Happiest Season,” about a lesbian romance.

The couple drew attention to transgender athletes amid widespread efforts to restrict their participation, including a recently signed Mississippi bill that bans them from competing on girls or women’s sports teams. It becomes law July 1.

“Trans students want the opportunity to play sports for the same reason other kids do: to be a part of a team where they feel like they belong,” Krieger said.

Added Harris: “We shouldn’t discriminate against kids and ban them from playing because they’re transgender.”

“Star Trek: Discovery,” “I May Destroy You” and “A Little Late with Lilly Singh” were among the other projects honoured in the pre-taped ceremony hosted by Niecy Nash. It’s available on Hulu through June.

The GLAAD awards, in their 32nd year, recognize what the media advocacy organization calls “fair, accurate, and inclusive” depictions of LGBTQ people and issues. Presenters and winners in this year’s event highlighted priorities including the importance of solidarity and self-respect.

“Friends, I’m so proud to stand with the LGBTQ community tonight, just as the LGBTQ community stands with Black and diverse communities,” said Sterling K. Brown, who presented the outstanding documentary award to “Disclosure.”

The “This Is Us” star, citing the Black Lives Matter and Black Trans Lives Matter movements, said that “we’re going to keep spreading that message of unity and justice until every one of us is safe to live the lives we love.”

JoJo Siwa, the teenage YouTube personality and performer, presented the award for outstanding children’s programming to “The Not-Too-Late Show with Elmo.” She said in January that she’s part of the LGBTQ community.

“I have the best, most amazing, wonderful girlfriend in the entire world who makes me so, so, so happy and that’s all that matters,” Siwa said. ”It’s really cool that kids all around the world who look up to me can now see that loving who you want to love is totally awesome” and should be celebrated.

Other awards went to Sam Smith, who was honoured as outstanding music artist for the album “Love Goes”; Chika, named breakthrough music artist for “Industry Games,” and “We’re Here” won outstanding reality program.

Cast members from “Glee,” including Chris Colfer, Amber Riley and Jane Lynch, paid tribute to Naya Rivera and her character in the series, gay cheerleader Santana Lopez. Rivera, 33, died in an accidental drowning in July 2020.

___

Online:

https://www.glaad.org/

Lynn Elber, The Associated Press







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