Naked short selling

Naked short selling is a trading practice where an investor sells shares they haven't borrowed or confirmed availability for, meaning they short a stock without ensuring they can deliver it later. Normally, short selling involves borrowing shares first, then selling them with the hope of buying them back at a lower price to profit. Naked short selling skips the borrowing step, which can lead to the sale of shares that don't exist, potentially causing market manipulation or artificial price declines. Many markets regulate or prohibit naked short selling to maintain fair and orderly trading.