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The way that a short sale occurs is that a person called the short seller borrows the item to be shorted from someone else and then sells it. The debt is for the item itself, so as long as it is cheaper to buy the item back later, then the short seller can make a profit by buying back the item in the future and returning it to the lender.

What is the correct term for the person who lends the item to the short seller?

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The broker lends the item to the short seller. The broker gets the item from the lender.

https://www.thestreet.com/story/10383365/1/how-short-selling-works.html

  • That is not the term I am looking for. First of all, anybody can lend commodities or equities or other goods for short sales; banks, trusts, funds, individuals, anybody--not just brokers. Secondly, I am looking for a specific term to the practice. – Five Bagger Sep 22 '17 at 4:49
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    If the borrowing is not done through a broker, then it's directly with the lender or owner – kponz Sep 22 '17 at 12:16
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After getting no answer to this question, I have read a number of technical treatises on short selling and found that there is no specific term for the person on the long side of a short sale, other than "lender". For example, in Eliot Norton's "On Short Sales of Securities Through a Stockbroker" (1907) he calls the party simply the "lender".

It might be appropriate to term the party a "call lender" because the usual feature of a short sell loan is that it can be called at any time, unlike monetary loans which usually can only be called after some stipulated time has passed. In fact, the actual loans are termed "call loans" so it would make sense to call the long short, the "call lender" however this usage has not been adopted.

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    So it looks like kponz' answer of "lender" is correct. – Ben Miller Sep 23 '17 at 12:21

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