Short Selling on VW

[VenalWinfrey]

Hoping someone can help me with the following!

I have been reading up on 'shorting' in general, and have followed the recent story between Porsche/VW. I understand the short selling process, and how individuals may have been caught out (essentially by betting the wrong way.)

My question is, when these individuals borrow shares, whom are they borrowing from, and what fees are owed? The suggestion in the media (to a layperson like myself) is always that these shares can be borrowed indefinitely, for no fee, and then returned as and when the borrower requires. My instincts tell me that any borrowing would cost something, I just wondered if somebody was able to tell me, what prices do traders have to pay to borrow shares, whom do they borrow from etc?

Any help appreciated - just I would really like to understand the cycle properly.

Thanks.

[eastern]

Most shares are borrowed from large financial institutions such as pension funds ie Standard Life, I dont know what they pay in charges all I can say is it gives me a warm feeling to know that they have had their fingers burnt!

[ukfinanceguy]

Typically, the short-seller will "borrow" or "rent" the securities to be sold, and later repurchase identical securities for return to the lender. If the security price falls, the short-seller profits from having sold the borrowed securities for more than he later pays for them. However, if the security price rises, the short seller loses by having sold them for less than the price at which he later has to buy them... Shorting stocks relies on the fact that securities are interchangeable, so that the securities returned do not need to be the same securities (i.e. the same physical pieces of paper) as were originally borrowed. Source: http://www.hedgefundfaq.com/answer.php?q=short -selling