jist1....If you define naked shorting as shorting without first borrowing shares, it is not illegal... How do you think HFT works? Shares are shorted millions of times a day "naked". They are bought back before settlement and therefore not illegal (according to the current rules of trading). Every hedge fund and broker is a "market maker" now and can employ the Madoff Exemption which allows the shorting of stock without locating or borrowing. Sad but true. The ABC's of manipulation and daily profits.
It can only be done through a disreputable broker and then they expose themselves to a pretty significant liability which I'm sure they don't want. It's pretty easy to spot "fail to delivers" and they are often tracked by the exchanges.
BTW, I don't consider short sales that are covered within three days "naked shorts". I'm talking about the real FTDs that don't cover within three days.
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