Yes. They need to be able to make naked shorts, as this is what allows traders to buy a share without having a willing seller at any given moment and vice versa.
> Is there any other way that the number of shares being shorted, could be greater than the number of shares in existence?
As I mentioned, It's perfectly cromulent to have multiple non-naked shorts on the same shares, so the short interest as a percentage of float can certainly exceed 100% without any illegal behavior. I imagine the reason for this misconception is that people think of a short as an "anti-share" that can't exceed the number of shares being traded, when it's really a more abstract investment tactic or contract.
Yes, market makers are allowed to sell short without having a locate.
It should be noted that the market makers will attempt to zero out their total exposure by the end of the trading session.
Do you mean, this is legal for market makers?
Is there any other way that the number of shares being shorted, could be greater than the number of shares in existence?