Marani Brands Inc. (MRIB)

[Matthew Berg]

Actually, any naked short selling is illegal. That's pretty much what SHO was put in place for. Naked short selling has always been illegal. SHO just firmed up the regulations and made reporting and supervisory criteria more stringent in the hope of curbing violations. That said, MMs are given some leeway in locating shares but must always do so. To be considered naked the MM would have to have no reasonable expectation of share availability and ignore the FTD marking which is highly illegal.

Most cases in which this happens is not a true illegal naked short. Most of the sanctions and fines enforced on the 19 MMs disciplined last year were for failure to carry out SHO custodial and supervisory issues in an attempt to save money on administrative costs to make the brokerage department of the member more profitable. Cutting corners is still a violation but the MMs weren't really doing anything with respect to trading and were not profiting by such. Just spending less.