A story went around yesterday, that SPY's are now on a tough to borrow list. Supposedely, some trading desks reported this when they tried. This is tough to believe. My first reaction was to completely ignore this as just one of many market rumors. Today, however, I noticed a very low volume for SPY. It is almost 2.40 pm one the East coast, and only 193mm traded. The 30 day average volume is 340MM. The significance of such low volume is difficult to explain on a regular day like today. I suspect that there may be some truth to this, since without a 'normal' two-way market, SPYs liquidity may have dried up. Makes sense. If this is true, we could be a few 'good headlines' away from a major squeeze. To the moon?
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