Naked Shorting
Naked short selling has played a key role in the current financial crisis, but what the hell is it? Here’s one definition: Naked short selling, or naked shorting, is the practice of selling a stock short, without first borrowing the shares or ensuring that the shares can be borrowed as is done in a conventional short sale. When the seller does not obtain the shares within the required time frame, the result is known as a “fail to deliver”. However, the transaction generally remains open until the shares are acquired by the seller or the seller’s broker, allowing a trade to occur when the order is filled.
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Naked Shorting Definition from Investopedia
investopedia.com
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4 Responses So Far
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Naked shorts are NOT illegal. What is illegal is not covering your short sales You and I must do so within X number of days. Big financial houses, and Porsche, get away by not heeding the time limit.
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Naked shorting has been illegal since forever, but Chris Cox has never enforced existing regs. It is a way for hedge funds to basically counterfeit shares of stock. These phantom shares are laundered between hedge funds and the system is now awash in these bogus “shares.” The problem is so bad that the IRS suddenly rescinded its directive of a few weeks ago that all hedge funds' short positions be made public — the problem is now so bad that it threatens to collapse the system. This is where the Bush no-regulation policies have led.
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naked shorting sucks, it shouldn't be allowed. However I completely disagree with the SEC for disallowing shorting period.
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