If we change our point of view to that of the user of a prime brokerage or the client side, we can better understand the plumbing of prime brokerages and how it can be used to achieve the end goals of clients, such as hedge funds. Borrowing more securities than you plan to short sell, is a strategy that can be employed to ensure stability of a short position. This strategy highlights and demonstrates how a short sale is actually a two step process. First, you borrow the security, then you sell the security you borrowed. These are two distinct steps that are separable in terms of timing and in size. For example, a hedge fund could borrow 100 shares of a security from its prime broker on day one, and on the following day, they may sell 60 shares of that security, which has been borrowed. They are now net short only 60 shares as their remaining 40 shares that were borrowed are still held by the hedge fund client as they have not been sold yet. This allows the hedge fund clients the ability to return borrowed shares easily without changing their net short position that is targeted by their fund. The lending client of the prime brokerage have the right to ask for their shares back whenever they like. So if they need their shares back and the prime broker calls on the borrowing client to return the borrowed shares, they could use some of their unsold shares as a buffer to return to the lender before they would need to begin purchasing back the shorted shares in the market to meet their prime brokers demands. This does come with the additional cost of extra borrow fees since more shares are borrowed than the desired size of the short position, but it does bring additional stability to the short position. Borrow fees have increased materially over recent decades, which has led to this strategy falling out of practice somewhat. But nonetheless, it is a useful example to highlight the true two step mechanics that actually underlie a short sale. Another consideration in a stock borrowing arrangement is the number of prime brokers that are used for each position borrowing from a diversified borrowing base, in essence using multiple prime brokers to lend you shares, has material market pricing benefits. Remember, every prime broker has their own direct inventory to pull from, so the supply demand dynamic for borrowing a certain security will vary depending on the prime broker. This often means a different borrow fee exists at different prime brokers for a different security, rather than there being a singular efficient market-wide borrow fee. In the worst case, if you cannot get direct access to inventory, you'll have to pay more intermediaries to find the securities. In most agreements, borrow fees can be changed at any time. This means as the supply demands dynamic on borrowing a security changes, the borrow fee can change daily in order for a hedge fund to keep their prime brokers honest on pricing beyond just their desire to keep a good stable relationship with the hedge fund. As a client, it helps having multiple pricing sources from different prime brokers to see whether brokers are changing their fees simply to be opportunistic or not. However, there is a consequence to working with multiple prime brokers. This comes from added operational complexity for the hedge fund's back office. When a hedge fund has multiple accounts open at different prime brokerages, they will have to ensure that they are monitoring each prime broker's collateral requirements on an ongoing basis. This means the hedge fund will need to transfer and move securities around between their various prime brokerage accounts to ensure the collateral is where it is needed to satisfy the requirements as market conditions change and values of securities, and thus collateral changes. As a result of splitting their collateral between different prime brokers, the hedge fund will not get the benefit of combining all their collateral to a single account, which results in the fund's total access to leverage extended by the prime brokers being less than it would be if it were under a single prime broker.