"Naked" may be meaning two different things here, sorry for the confusion.
When you short a stock, your broker borrows them (or lends you some of theirs). The stocks do exist on paper. From your own POV you may be selling them naked - from the market's perspective, you are not.
When a market maker shorts a stock, they don't need to exist in any way. This is the naked shorting I'm talking about.
You can read more at the "market maker" page on wikipedia, it explains it.
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