Friday, August 7, 2009

Short Takes: Book Giveaway, Securities Lending, and Retroactive TFSA Room

1. To enter the draw to win one of five copies of George Dawes Green’s novel Ravens (see review here), send an email with the subject “Book” to the address shown on the upper right corner of this blog. The draw will close Saturday August 8 at noon. I will contact the winners to get (Canadian or American) postal addresses.

2. Preet outlines the risks of securities lending as practiced by many index ETFs, and Patrick speculates on how this could become a bubble. It’s not clear to me how securities lending is most likely to cost investors a significant amount of money, but the fact that it appears to be free money makes me very suspicious.

3. Ellen Roseman finds that the Ontario Securities Commission (OSC) isn’t very effective at protecting minority shareholder rights.

4. Big Cajun Man learns a few lessons while cleaning out his basement.


  1. Hi Michael. Thanks for the link. What if the ETF management lends your securities for high interest to short-sellers with bad credit? It would boost management's profits, and if the short-sellers can't meet their obligations, it's the unitholders who are on the hook. This should show up over time as a form of tracking error, making the nominal MER essentially irrelevant.

  2. Patrick: I suppose that ETF management could become more greedy over time and agree to lend securities to just about any short seller. The only limit would be that they couldn't lend more securities than they actually hold. In such a situation, the drag on ETF returns could easily be much more than management's profits.

  3. Thanks for the mention, luckily the Garbage Men took all of the crap, but there is more crap to expunge to only look like we have been hoarding for 10 years...

  4. Thanks for the link. What has me slightly concerned is that there doesn't seem to be much in the way of regulatory oversight, and the four main securities lenders in Canada have just formed some sort of organization which might end up becoming an SRO.