Time to read the SEC SHO FAQ [1] again: > Question 7.1: Do naked short sale transactions create "counterfeit shares?" > Answer: Some believe that naked short

Time to read the SEC SHO FAQ [1] again: > Question 7.1: Do naked short sale transactions create "counterfeit shares?" > Answer: Some believe that naked short sale transactions cause the number of shares trading to exceed the number of shares outstanding, which in turn allows broker-dealers to trade shares that don't exist. Others believe that the U.S. clearance and settlement system, and specifically the NSCC’s CNS, produces "phantom" or "counterfeit" securities by accounting for fails to deliver. > Naked short selling has no effect on an issuer's total shares outstanding. There is significant confusion relating to the fact that the aggregate number of positions reflected in customer accounts at broker-dealers may in fact be greater than the number of securities issued and outstanding. This is due in part to the fact that securities intermediaries, such as broker-dealers and banks, credit customer accounts prior to delivery of the securities. For most securities trading in the U.S. market, delivery subsequently occurs as expected. However, fails to deliver can occur for a variety of legitimate reasons, and flexibility is necessary in order to ensure an orderly market and to facilitate liquidity. Regulation SHO is intended to address the limited situations where fails are a potential problem. > Similarly, CNS has no effect on an issuer's total shares outstanding. With regards to the contention that the U.S. clearance and settlement system, and specifically NSCC's CNS system, creates counterfeit shares, this is not the case. CNS is essentially an accounting system that indicates delivery and receive obligations among its members (i.e., broker-dealers and banks). These obligations do not reflect ownership positions until such time as delivery of shares are actually made. Ownership positions are reflected on the records of The Depository Trust Company ("DTC"). [1] https://www.sec.gov/divisions/marketreg/mrfaqregsho1204.htm https://www.sec.gov/divisions/marketreg/mrfaqregsho1204.htm