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I think you could make an argument that allowing naked shorting could in fact be beneficial. Part of what's allowing gamestop stock to explode recently is that
by tempestn 6y ago
I think you could make an argument that allowing naked shorting could in fact be beneficial. Part of what's allowing gamestop stock to explode recently is that it's next to impossible to find shares to borrow for shorting. If everyone who wanted to short the stock could do so without having to borrow shares, price discovery might work significantly better. (I assume the counter-argument would be that short squeezes could be even more intense. But perhaps they would be less likely to occur in the first place.)
- twic 6y agoThis is a reason why cash settled single-stock futures are useful. They have the same economic value as a long or short share of stock, but because they're just a bet on the price, they don't have any of the awkward features that come with needing to deliver an actual share.
- deleted 6y ago[deleted]
- jkhdigital 6y agoIf stocks were synthetic assets then sure. But common stock represents an ownership share of a company, which is a collection of real physical things. Naked shorting means you’re basically allowing anti-stock, but there’s no such thing as “anti-ownership”. Stock, like hard money, should allow debit balances only.
- smabie 6y agoReally what you want in this case are just stock swaps or futures that are cash settled.