October 31, 2008
If the standard market can't accurately tally short transactions in a timely manner, then a SECONDARY market should be created just for this purpose. This "short" market will be responsible for tallying shorted shares and for real-time reporting of all shorted securities. The public will therefore know at all times how many shares of a security are available to short, and whether or not that maximum number has been reached. Naked shorting must be made impossible to occur.
Accurate, real-time tallying of shorted shares will enhance market transparency. If a stock is being heavily shorted, the "pool" of available shares to short will "dry up". The market should be able to recognize and verify the maximum number of shorted shares being reached. Naked shorting will be impossible.
Owners of shares should have a way of denying lending for shorts, or at least, fees should be paid to the owner of the shares that are borrowed to short.