why is shorting frowned upon?

[cramerica1972]

especially naked shorting?i saw on cnbc thursday that the sec will take a look at the shorting of stocks.

[cramerica1972]

especially naked shorting?i saw on cnbc thursday that the sec will take a look at the shorting of stocks.Naked shorting is in essence make-believe short-selling. In the same way kids play doctor without the medical equipment, naked shorters sell unborrowed stocks -- stocks that no one has borrowed and possibly never will. The SEC allows naked shorting in two cases: to maintain liquidity in hard-to-find shares and for anyone who shorted unborrowed shares before 2005. That second exemption has generated its own share of controversy.<<<<so my question is:can naked shorting cause a market crash?

[aiki14]

Naked shorting is in essence make-believe short-selling. In the same way kids play doctor without the medical equipment, naked shorters sell unborrowed stocks -- stocks that no one has borrowed and possibly never will. The SEC allows naked shorting in two cases: to maintain liquidity in hard-to-find shares and for anyone who shorted unborrowed shares before 2005. That second exemption has generated its own share of controversy.<<<<so my question is:can naked shorting cause a market crash?

Theoretically yes, practically probably not. If a huge amount of shares of dow stocks were manipulated in this fashion it could precipitate a big move down that could draw the broader market down. The amount of shares necessary to do this is unlikely to be shorted by any individual broker. The selling of shares to long holders without delivering is more likely to send the market down.