Naked short selling is allowed by market neutral market makers, but it does not function as convention short seller. Under current regulation, a naked short seller is not looking to make a profit from a future decrease in price, but instead ensuring market availability of the stock. E.g., if there is a sudden increase in buyers market makers continue to make good on their obligation to always be willing to buy and sell a certain stock. Market makers are required to buy a share back from the market sometime in the future to replace the phantom share that they sold.

Well, the market maker has to deliver the share in T+2 days just like with every other sale they make. Yes.

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.

As an investor I would rather an actual share, than a promise. They are not fungible to me. Even disregarding the risks, an actual share comes with voting rights.

When you buy a share, no matter whether from a short seller or anyone else, all you get immediately is a promise.

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 read you as saying that (indefinite) naked short selling should be allowed, meaning that the buyer doesn't get a share after 2 days, or ever.

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.

> I wonder what the value of short term naked short selling would even be?

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.

Physical settlement is relativement rare in those markets. The main purpose of the transactions there is not to get physical delivery at expiration, let alone two days after the transaction. Many contracts are cash settled and if not you can always close positions right before expiration (and maybe roll them over).

When someone buys a stock very often the purpose is to "physically" have it as soon as possible.

Yes, people do often take delivery of stocks.

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.