XLI Borrow Market Hits a Wall

The borrow pool for XLI has effectively run dry. Availability has collapsed to just 1.3% — the lowest recorded in the 52-week dataset. Every share in the lending pool is now lent out.

Six days ago, availability sat at 79%. A week before that, it was above 110%. The speed of this collapse is the story.

From Tight to Exhausted

The previous ORTEX note, published September 16, flagged availability dropping from ~110% to 28.6% as an unusual signal. Since then, the deterioration has continued without pause.

By September 18, availability had reached 8.2%. By September 21, it was 1.3% — the 52-week low. The borrow market for this ETF has gone from relaxed to structurally exhausted in under three weeks.

Cost to borrow has followed. It stands at 1.31%, up 60% in one week and up 146% over the past month. For context: in mid-August, cost to borrow was hovering around 0.46–0.53%. The current rate is nearly three times those levels. For a liquid, large-cap sector ETF, a CTB above 1% with near-zero availability is an extreme combination.

Short Interest Keeps Climbing

Short interest rose another 3.9% on September 21 alone. It now stands at 15.5% of free float — up from 14.7% when the last note was published, and up 25% over the past month.

That is 23.6 million shares short. The pace of accumulation has not slowed despite borrow becoming scarce and expensive. Shorts are paying more to hold their positions, and the pool they can borrow from is nearly gone.

Options Signal Shifts

The put/call ratio sits at 2.07, near its 52-week low of 1.91. The 20-day average PCR is 2.46. The current reading is 1.66 standard deviations below that mean.

The drop in PCR — at the same time short interest is rising and borrow is collapsing — suggests some market participants are rotating from puts toward call-side positioning. This divergence between the lending market and the options market is worth monitoring.

What to Watch

The combination of record-low availability, a 60% weekly spike in cost to borrow, and 15.5% short interest creates an unstable setup. New short positions are nearly impossible to initiate — there are virtually no shares left to borrow. Existing shorts face rising carrying costs with no relief in sight from the borrow pool. Watch whether cost to borrow accelerates further, or whether the availability figure begins to recover — either would be a material development.

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Data summary

• Short interest: 15.5% of free float, +10.6% in one week, +25.1% in one month
• Availability: 1.29% — 52-week low (was 79.6% on September 17)
• Cost to borrow: 1.31%, +60% week-on-week, +146% month-on-month
• Put/call ratio: 2.07 — near 52-week low, 1.66 std devs below 20-day mean
• ORTEX short score: 69.8 (as of September 18)
• Price: $169.98, -5.7% over the past month