Because they being bought by people who believe they are buying legitimate stock. It is these people (their brokerage houses) who are reporting the transaction to the TA.
The naked short seller doesn't report anyhting to the TA.
Nobody knows the shares are fake except the short seller and the person manning the share distribution desk at the brokerage house. All short trades have to have their shares borrowed through him so in order for there to be naked short selling, he has to be in on it.
All that is reported to the TA is that artfink bought 100k shares of FGFC. This is reported by your brokerage house. They have no idea that the shares were sold to you as a naked short sale.
There is a legal side to the trade, the buying, and an illegal side to the trade - the selling. It is the buyers side that is responsible for reporting the transaction to the TA. Like I stated before, it is not reported to the TA that artfink just purchased 100,000 bogus shares from someone who is naked shorting. All that is reported to the TA is artfink now owns 100,000 shares.
So you are correct in saying that naked shorting is not reported to the TA, but if enough shares are nakedly shorted, you can see it throught he TA's numbers.
Example: Let's say FGFC has an authorized share count and outstanding share count 100 million.
If the TA is reporting an outstanding share count of 6.5 billion it is a forgone conclusion that someone is naked shorting FGFC.
If the TA is reporting an outstanding share count of 200 million, then there may or may not be naked shorting going on. It could be that there is a legitimate short position borrowed against every outstanding share of FGFC.
If the TA is reporting an OS count of 100 million, then there is no short position in FGFC.
In any case, I think this is all a moot point for FGFC as I think the discrepancies in share count have to do with the reporting of privately purchased restricted shares.
