Naked short selling on NYSE: Makes you wonder

In an article on possible illegal short selling of Vonage stock, contributing to its fall, Wall Street Journal reported the following:

Some of the NYSE regulatory questions in the letter appear aimed at determining whether dealers or their customers may have violated rules curbing the practice of "naked short selling," or selling shares without having them available or knowing how they can be provided to the buyer when the transaction settles after a few days.

The rules against naked shorting were tightened in mid-2004 by the Securities and Exchange Commission, and took effect in January 2005. They put new requirements on exchanges to police trading. As an SEC official noted at the time, naked shorting could drive down a stock price in an "abusive or manipulative way."

This makes one wonder about the extent of abuses in Arab exchanges, and how much they may have contributed to massive reallocation of wealth from those without access to brokers to those with such access.