How hedge funds and brokers have manipulated the market by Lucy Komisar Part 2 - Naked Short Selling and Fails to Deliver The SEC allows traders to short a stock, which means to sell it even if they don’t own it, hoping to buy it back later at a lower price and bank the difference. Short sellers borrow the stock, usually from a broker, who either has it in their inventory, borrows it from another broker, or vows to “locate” the stock when the time comes and cover the short. That promise is often fake. A broker handling several sellers will borrow synthetic or manufactured shares, or “locate” the same stocks for multiple shorts. Traders and brokers have been mildly sanctioned for this scam. Sellers are supposed to send shares to buyers within two days. If they don’t convey the stock, there is a failure to deliver (FTD). This is also known as naked short selling. Traders that have outstanding FTDs are required to transfer the shares within a given time and are restricted from selli