Fung,
You're conflating margin on borrowed longs with naked shorts, which aren't backed by borrowed shares in the first place. That distinction is key.
Margin rules absolutely apply when you're leveraging real positions with collateral—yes, the system is designed to call in those loans. But with naked shorting, there are no real shares. There’s no collateral. It's an IOU floating in the system, often routed through ex-clearing desks, omnibus accounts, or offshore brokers where normal settlement rules get “deferred” or bypassed entirely. That’s the core of the naked shorting issue—it exists precisely outside the standard enforcement framework you just described.
The whole point of what I’ve been explaining is this: if every synthetic share had to be margined properly, they wouldn’t exist. The regulatory arbitrage is the loophole.
As for my recent silence?
It’s not about being “humbled.” It’s because the plan is already in motion.
There’s no need to argue every day when you know what’s coming. Some of us post to push the story forward. Others post to stall it. The market will sort it out soon enough.
—Krombacher
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