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Regarding who the shares are borrowed from, from my understanding, any client who signs a margin account agreement also signs something that says "sure, you can borrow my shares, and lend them to another person". Your account will never show it, and presumably there's no way to actually lose those shares (between insurance, and the margin allocated on the borrowers side).

As other people say "large institutional" investors most likely provide a nice pool of shares as well, which their agreements with the brokerage allow to be shared out.




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