Pardon my ignorance, but I thought it was already illegal for naked short selling of stocks to be conducted. Meaning, that in order for a trader/institution to sell a stock short, the broker/institution had to be able to borrow the stock from another account which already owned the stock. I thought this requirement was in place since somethng like the 1930s. So why is there a big deal about all the SEC getting involved to prevent naked short selling (i.e. no shares are actually borrowed) on the stocks of some of the large financial institutions. Is this a case of brokers breaking the rules in order to generate fees from their clients (the hedge funds which have been doing the bulk of naked short selling)? Is this a case of rules being applied to individual traders, but not the big boys? Anyone who's in the know - I'd appreciate an explanation of what's been going on here.