More specifically its formally called: Naked Short Selling. This is due to the fact that the short seller has not performed a "locate" or a "resonably timely and assurable ability to locate" .. a source from which to borrow shares to complete the short sale.
You and I (retail) are subject to that rule and it is enforced by retail brokers. have you shorted before? Your broker, depending on who it is, must first perform a locate of shares in the issue you wish to short. If they cannot, you cannot short. If they can you can short to the specified amount of thier discretion or yours. Depends on the size and your account standing.
MMs assert that they alone are excepted/exlcuded from this rule by the nature of thier position in relation to the overall market/transaction. Their assertion is that they need the ability to do this in order to maintain an orderly market and they have access to these shares on a "reasonable time line"
That's important bit that you and I need to observe here. Its a bone of contention with many and its the same point that MMs repeatedly abuse with impunity in the BB and PK markets.
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