There is somewhere in between. You can have market makers but take away their quasi monopoly. Make sure that all markets require the best bid and ask to be shown even if it's mine.
Technology does exist to make markets true auctions, fair to all.
The key is regulation. As the participants in the conference indicated, require that stock be located BEFORE a short, rather than some nebulous shares held at DTCC, then you would eliminate much of the problem.
As for MM's, they have the exception to naked short. However, this is for the purpose of making a market, not for just lining their own pockets. Many of us who invest in microcaps see that this is a joke. Many stocks have no real market, huge spreads, etc. The MM's are not doing their job.
When they naked short, there must be limits based on duration, price movement, volume. These are all things that can be determined and the basis for regulation. What I'm saying is that a MM's job does not mean that they can naked short and cover a month later or 6 months later. The idea of making a market in today's fast paced electronic age, means that they should be able to naked short for a period of minutes or hours. Otherwise, they are able to manipulate, plain and simple.
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