Morning Superstonk, as requested by a few, I have an update about the email I sent to Ortex yesterday. I'm going to copy and paste the full body of the email but will remove names for obvious reasons. Let me know what you guys think and how you'd like to see the count continue, I'll leave it to the sub to decide before I make my post today. My take on it is that the drop we saw yesterday shouldn't have occurred and only did so due to the timing of "accounts being rolled". Let me know what you all think, cheers!!
Thanks for reaching out.
The reason that Short Interest dropped in GME (and quite a few other stocks as well) is because on a large report of returned stocks which first appeared on our intraday lending at 03:30am Eastern, today and was confirmed in the daily consolidated data for yesterday.A drop of Short Interest, even though markets are closed, is not unreasonable. In order to return a share, it must either have been borrowed and not sold short, or borrowed, sold, and repurchased. In the case of the second option, the trading volume would have to be at least two days prior in order for the trade to settle.
However, this does not appear to be what is actually happening here. Last June we saw a similar large volume of returns in a reasonably large number of stocks occur at the same time of day, and the following day, these large changes were almost entirely reversed. That appears to be the case here as we saw large ‘new’ borrows this morning at the same time of 03:30am Eastern and this has largely had the effect of reversing yesterday’s returns.
Unfortunately, from the nature of the data that we receive, it is not possible to determine exactly who was responsible, or why this has occurred but we believe that this may be when large lenders have rolled their accounts to new set of accounts and the two transactions occur either side of the data cutoff (06:30 Eastern). We are working with our partners in an attempt to get more insight into this data.
As we have now seen this occur twice, we should be able to devise the means to identify this ‘phenomenon’ so that we can adjust our estimation algorithms to prevent it from affecting our Short Interest estimates as clearly, with hindsight, it shouldn’t have done so yesterday.
I followed up with Ortex to clarify what was said in their initial response back to me and added a couple other questions. I replied back to this email with a couple more questions but haven't gotten a response back and probably won't until tomorrow since they're 5 hours ahead. Anywho, read on.
To answer your questions:
Q. The drop we saw in the data yesterday should not have occurred, correct?
A. The drop in reported stock lending did occur, but is most likely to be administrative rather than relating to a change in Short Interest. That means that this should not have been reflected by a change in Short Interest. The fact that these very large changes occurred on a holiday indicates that all/almost all of this should have been ignored (although this ‘phenomenon’ and the absolute scale of it would be harder to distinguish if we observed a change like this on a trading day) .
Q. From what you said in your response, if these accounts were “rolled” the data should not have been affected because the positions would still be open whether it be a borrow or a short sale and the only reason it was affected was due to the data cutoff time.
A. That is a working theory. The fact that we recorded these changes across a large number of stocks at the same time on two successive days, and that it was in the middle of the night in Eastern Time, suggests that what we observed was the result of an automated process.
Q. I’d like to understand a few things as to how Ortex acquires its data. Is all data for the previous day collected every day at 03:30am Eastern? Is it collected between 03:30am Eastern and 06:30am Eastern?
A. We have two distinct feeds of data:
Intraday - This is collected throughout the day from around 7:30am Eastern until 6am Eastern the following day. It was this source that first recorded a change to many stocks at 03:30am. There is more detail about Intraday data in the help section on the Short Interest page for any stock, but a key point is that it is transactional and that the appearance of a transaction in the intraday logs does not imply that it will definitely be consolidated into the daily data as it may be cancelled or closed incomplete before then.
Daily - The cutoff for daily data is 6:30am Eastern and is usually on the system by 7:30am. This tracks completed securities lending activity for the previous day.
Q. Can you tell me who provides this data to Ortex?
A. ORTEX Securities Lending data covers 85% of global security lending, sourced from the world's largest combined pool of agent lenders, prime brokers, and broker-dealers who submit their inventory. We also obtain official US & Canadian short interest data (among other official reports).