Naked Short Selling

Naked short selling involves selling shares that have not been affirmatively confirmed to exist. Essentially, it's when traders short sell stocks without actually borrowing or ensuring they can borrow the stock first. This practice can lead to market manipulation, as it artificially drives down the price of a stock due to the increased supply of shares in the market.
Unlike traditional short selling, where shares are borrowed before selling, in naked shorting, the seller fails to deliver the securities to the buyer by the settlement date. This results in "failures to deliver" and "failures to receive" which distort the market, causing significant issues for companies and investors.