The Berlin exchange is not where the naked shorting is being done. It is being done in the US by the US Market Makers. It is just the existence of any foreign exchange listing for AAGH that allows a US loophole to be used to illegally short the shares of AAGH in the US. Essentially, the US MMs are allowed to claim that they believed that shares were available on the foreign exchange to cover their shorts, even if there aren’t any there. It is not required that any shares trade at all in Berlin for this to work. The same thing could happen if there were no Berlin exchange, but there was an AAGH listing on the Toronto exchange instead (which there isn’t).
The big deal with the Berlin exchange is that a listing can be established there for AAGH by some party other than AAGH. This is not so on other foreign exchanges. Berlin will not necessarily remove the listing if the company underlying the Berlin trading symbol requests it.
Shutting down the Berlin listing would remove part of the problem. There are still other ways for the MMs to naked short the stock, but it entails more risk for them. Some other companies have forced the issue by issuing a surprise dividend (which the shorts must pay), or by recalling and reissuing all the shares (which will force a full short cover). Guesses as to how high the share price could go in a forced short squeeze are beyond me, but the peak that gets hit would definitely make share holders very happy.
Shorting by using existing borrowed stock is legal. Naked shorting (except by MMs on a very short term basis, and only to provide market liquidity … normally just for a few days) is not legal. The existence of a foreign exchange that lists AAGH, allows the pretense that there is existing borrowed stock involved in what is really illegal naked shorting.
rjc
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