Naked short selling is selling stock you don’t own, but not borrowing it and making no attempt to do so.
"SEC Chairman Christopher Cox reffered to "the serious problem of abusive naked short sales, which can be used as a tool to drive down a company's stock price to the detriment of all of its investors. The Commission is particularly concerned about persistent failures to deliver in the market."
Furthermore:
In a legitimate short sale, the seller first borrows a share of stock, and THEN sells it, hoping to buy it at a lower price before he returns it to the lender, his profit being the difference between the sale price, and his later buy price. It is a bet on a price decline, and legal as described. Sell high, buy low.
A naked short sale is a manipulative trading technique. It takes advantage of a structural deficiency in the system that allows a transaction to occur, and all moneys to be paid, before delivery occurs.
So a transaction goes by on the tape - a sale - and it is processed, and has an effect on the price of the stock, but the delivery portion of the transaction is left for days later. Meanwhile, the depressive effect of thousands of these sales extracts it toll on the price - the naked sales are still sales, and are treated as legitimate by the system.
At some point after the checks have been cashed and the commissions distributed and the fees paid, the share never shows up.
My issues are with the company's FALSE statements. I can do nothing more about naked short selling than I already have.
