Naked shorting has been illegal for a decade: https://money.cnn.com/2008/09/17/news/companies/sec_short_se...
https://www.nyse.com/regulation/threshold-securities
It's still on the list.
You are only supposed to be able to hold naked shorts for "13 consecutive settlement days".
> This does not necessarily mean a lot of people are doing evil illegal nefarious naked shorting! Really, I promise! There is no special limit on shorting at 100% of shares outstanding! Here is an explanation of how options market makers (discussed below) are allowed to short without a locate, but I want to offer an even simpler explanation. There are 100 shares. A owns 90 of them, B owns 10. A lends her 90 shares to C, who shorts them all to D. Now A owns 90 shares, B owns 10 and D owns 90—there are 100 shares outstanding, but190 shares show up on ownership lists. (The accounts balance because C owes 90 shares to A, giving C, in a sense, negative 90 shares.) Short interest is 90 shares out of 100 outstanding. Now D lends her 90 shares to E, who shorts them all to F. Now A owns 90, B 10, D 90 and F 90, for a total of 280 shares. Short interest is 180 shares out of 100 outstanding. No problem! No big deal! You can just keep re-borrowing the shares. F can lend them to G! It's fine.
Hedge funds are supposed to be allowed to naked short the stocks they don't like into oblivion, transferring wealth from retail investors to hedge funds.
The hysteria and pearl clutching at this wealth transfer being reversed is hilarious.