Floating Supply of Securities

Source: Encyclopedia of Banking & Finance (9h Edition) by Charles J Woelfel
(We recommend this as work of authority and you can order it here)      

The portion of the listed stocks or bonds of a corporation which is available for trading and speculation, i.e., in the hands of brokers and speculators, as distinguished from investors.  A large part of the securities, and especially stocks, of large corporations is never purchased outright by investors, but is carried on margin.  Whatever amount is so carried by brokers on margin for the account of customers and in the hands of traders and speculators constitutes the floating supply.  Stocks owned outright, retained in safe deposit boxes, and not placed on the market or subject to speculative commitment do not constitute floating supply.

The floating supply of some securities is small.  This is true of the securities of the investment class or those which for some other reasons are closely held.  The floating supply sometimes is so small that a premium may be charged for borrowing.  This occurs when short selling has been excessive and brokers find it difficult to borrow stock with which to make delivery from ordinary sources.

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