Giovanni di Maggio

What the SEC Really Accomplished with Its New 'Short-Sell' Rule

I agree with garsonvonah, play with what you have, either money to buy or stock to sell.
Those who rant about gov interference (=regulation) are either silly if they believe a fair market can exist without regulation or they have their own private interest to defend.
The millions of retail investors would have no chance to save their savings from the vultures otherwise.
Regulation is rather still to weak as the rules are not sufficient and don't really get enforced.
Even if one believes that one should be allowed to speculate with borrowed shares, this does not justify naked shorting except for very limited cases (i.e. mm's during a very short period in order to make a market when demand and supply do not match momentarily).
But even "regular" short selling is mostly based on abuse because brokers mostly do not ask the owners of the shares that they "borrow" whether they want to lend their shares. If I own stock X in a margin account (for which I pay interest!) who or what gives the broker the right to "borrow" my stock without even asking me? Forget about paying me for borrowing my property.
It is obviously against my interest to lend my stock (of which I am long because I believe it will go up) to someone who wants to drive it down by shorting it and (not so rarely) afterwards manipulates the market with rumours to make it go down more. If they want to sell short, ok, borrow the stock from a conscient (!) owner who knows that he lends it to a short seller.
This is what I mean when I say there is even too little regulation. Nobody should be allowed to use my long position to short sell without my consent.

And OF COURSE nobody should be allowed to sell stock that they don't own nor even borrowed. This not only "may lead to counterfeiting" as one comment says, this IS counterfeiting because it creates immediately (!) non existing shares (few or many, whatever) of the traded stock.
The stock that is naked short sold does not exist, the shares traded are counterfeited but the buyer does not know this and believes that they bought "real" stock. Indeed their account shows that they own this stock, but in reality it does not exist.

If you pay with a cheque that is not covered either by your money in your account or by a loan or credit margin of your bank, this is called fraud. Paying with a cheque that is not covered is like printing false money. Naked short selling is nothing else. Like a chque or a bank note the share of stock represents money. If you falsify bank notes or commit cheque fraud you go to jail.
Why not if you sell non existing stock?