After all, we allow something similar to naked short selling when people write options or trade futures. And those markets work just fine.
My comment was meant to say that I think it would be fine to allow everyone to do naked short selling like that. Of course, subject to margin requirements etc.
The actual share gets delivered 2 days later, and it doesn't matter whether who you bought from, short-seller or otherwise.
Your voting rights are exactly the same.
You are right that replicated shares with options and other derivatives usually does not come with voting rights. That's true.
The market price for voting rights on individual shares is usually miniscule. But non-zero.
I wonder what the value of short term naked short selling would even be? In that timeframe borrowing should not be very costly anyway? The GME shorts have been short way longer than 2 days.
First, to put everyone on the same footing as the market makers.
Second, just to make short selling easier in general. Short sellers are massively important to spots bubbles and other asset mispricings, but they never get any love.
When someone buys a stock very often the purpose is to "physically" have it as soon as possible.
Though funny enough, stocks are already a virtual thing and exist in computers only. Whereas oil or onions are physical goods, and there are real consumer who absolutely need real physical onions.
To be super clear, naked short selling is banned for everyone but market makers [1]. A market maker goes naked short when there is a buying frenzy. Their economic incentive is to then cover the short given they are in a buying frenzy.
The NYSE explicitly markets its specialist system to issuers as a stabiliser mechanism. It’s a selling point to long-term investors and Boards. The only people who get upset about this are hedge funds and day traders who get ahead of their skis.
[1] By Wall Street tradition, every long losing money must allege naked shorting. That doesn’t substitute for evidence of it. Large amounts of short interest do not indicate naked shorting. (Lots of FTDs do, but this figure has to be scaled to leverage and volatility.)