Naked shorting
A 'naked' short involves shorting shares that are not available to borrow.
Shorting involves borrowing shares from a broker, then selling them in the hope they will fall in price and can then be bought back for a profit and returned to the lender.
A 'naked' short involves shorting shares that are not available to borrow. This can arise due to the gap in stock trades between the deal date and delivery date- typically three working days. Brokers should ensure that shares they don't own, but plan to lend to shortsellers, will be delivered to them within that three-day window.
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