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.
But some 'easy to borrow' US shares can be lent out without the broker finding them first. Should they not then turn up, the borrower has unintentionally sold 'naked'. Deliberate naked selling is banned in America.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
See Tim Bennett's video tutorial: Why a short-selling ban won't work.
-
ISS backs Edinburgh Worldwide’s board as Saba questions SpaceX selloffShareholder advisor ISS has recommended that shareholders vote against Saba’s proposals to replace the board of the Baillie Gifford-managed investment trust
-
13 tax changes in 2026 – which taxes are going up?As 2026 gets underway, we look at what lies ahead in terms of changes to tax rates and allowances this year and how it will affect you.
