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is there anything fundamentally wrong with having the ability to loan one stock multiple times?
Do you mean you loan it to me, I short, buyer Mickey loans it to Fred, he shorts, buyer noob loans to Adam Smith, he shorts....?
No. Totally standard. The longs don't care whom they buy from. It's good for market liquidity and price discovery.
If you're trying to ask can Morgan Stanley loan the same share out to multiple hedge funds, the answer is no. They have to deliver in 2 days.
Occasionally there are fails because people are human and screw up the process by mistake, but that has nothing to do with what's going on in GME.
I know you're not saying this, but a lot of the ignorant on here/wsb seem to be saying, when you break it down, that stocks should never be allowed to fall and if they do and they've lost money it's not their fault.