Naked shorting is illegal. Conditions need to be met by regulatory agencies to ensure it and any equivalent mechanisms to it don't happen. Broker-dealers can lend internally to close a short position and create a loan instead. FINRA is apparently considering regulating this. FINRA MUST be held accountable to treat a defined intra-member SI-defeat mechanism the same way it would treat its effective position: a synthetic short. Additionally, it should be made illegal to use synthetic short positions to facilitate the closure of another synthetic short position. This is a regulation defeat mechanism.
Anonymous-T Comment On Regulatory Notice 21-19
Naked shorting is illegal. Conditions need to be met by regulatory agencies to ensure it and any equivalent mechanisms to it don't happen. Broker-dealers can lend internally to close a short position and create a loan instead. FINRA is apparently considering regulating this. FINRA MUST be held accountable to treat a defined intra-member SI-defeat mechanism the same way it would treat its effective position: a synthetic short. Additionally, it should be made illegal to use synthetic short positions to facilitate the closure of another synthetic short position. This is a regulation defeat mechanism.