Some ETFs Are Very Difficult To Sell Short Due To A Shortage Of Available Shares

Smartmoney.com has an interesting article about shorting ETFs. The focus of the article is that despite the ETF industry's claims that one of the major benefits of ETFs is their ability to be sold short, many brokers are unable to actually sell shares of some of the ETFs short due to a shortage of available shares.

As I mentioned in a previous post, to sell shares short, one's broker has to borrow the shares from some other party who has a long position on the shares (usually another broker). Unfortunately, if no shares are available for borrowing, then it is not be possible to sell short any shares. This is disconcerting because on of the strategies I intend to implement in the future is a long-short arbitrage strategy (I have already tested such a strategy, as discussed here and here) where I sell short shares of a first ETF and use the proceeds of the short sale to purchase a long posiiton of a second, and different, ETF I think will outperform the first ETF.