Definition of naked short selling

The practice of seeking to profit from an expected fall in the price of an asset by selling shares you do not own without borrowing, or making arrangements to borrow them. [1]

In short selling, investors borrow stocks to sell them, betting that they can buy them back at a lower price and profit from the difference. A "naked" short seller has not arranged to borrow the stock at the time of sale. [2]

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In depth: Regulating short-selling

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