Say $A shares are selling at $100, but I think they’re overpriced. So I borrow
10 shares, pay my brokerage interest and post some collateral. I then sell the
shares for $1,000.
Whoever buys my shares has no idea that I do not own them. In a naked short, I
do not actually borrow or ensure that the security can be borrowed within the
standard 3-day settlement period. As a result, I fail to deliver the securities
to the buyer.
Whoever buys my shares has no idea that I do not own them. In a naked short, I do not actually borrow or ensure that the security can be borrowed within the standard 3-day settlement period. As a result, I fail to deliver the securities to the buyer.
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