No. of Recommendations: 2
I do not think this is always possible. Let's say a bunch of hedge funds decide to naked short Berkshire Hathaway. Each of 20 of them short 100,000 A shares.

Now, whether or not Berkshire goes up, let us say after 3 days, most of those who bought those naked shares wish to sell, or even if they do not wish to sell, but their brokers insist on delivery of the shares. The hedge funds cannot possibly deliver because they do not have the shares, and furthermore...


This is why I think we also need rules that in effect restrict the short interest to something shy of 100%.

One such rule would be that a share which is currently borrowed for shorting, can't be re-borrowed. As the short interest plus non-borrowable shares (mostly in non-margin accounts) approaches 100%, it would become progressively more difficult and eventually impossible to borrow shares for shorting.

Another would be that when short interest exceeds some threshhold, there would be rent to pay on any further borrowing of shares - paid by the borrower to the owner being borrowed from. The rent is the current market price at the time of borrowing, times the short interest. Anyone shorting when the short interest exceeds 100% would be absolutely guaranteed to lose money (but there'd be no problem finding shares to borrow).

One of these rules, or something else along the same line, is in addition to actually enforcing the existing rules against naked shorting.

(Are there any other rules going unenforced? All such rules should be either enforced or repealed - after examination rule-by-rule to see which makes more sense.)
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