Naked-shorting, which is normally illegal and can't occur on a blockchain, did occur in Uber's troubled IPO. It hurt investors but was legal. Naked shorting in IPOs has altered the relative power between banks, issuers and investors--banks now have less fear of losses from pricing an IPO too high.
since its peak in 1996. There are myriad reasons why this has happened--private companies have better access to capital than they used to, publicly-traded companies face much higher compliance costs relative to private companies, and companies open themselves up to greater lawsuit risk when they’re publicly-traded . The SEC has taken several steps to try to fix this and make capital markets fairer to regular folks.
It once made sense for securities to be owned indirectly , just as it once made sense to insert layers of intermediaries into settlement processes to minimize the quantity of transactions that firms settled with each other . Technology limitations once dictated this market structure--and precluded same-day settlement of securities trades.If we were re-designing equity markets from scratch, they would look nothing like they do today--and they would be much more investor-friendly.
Regarding the indirect ownership feature, most of us believe we own securities in our brokerage accounts but that’s not the case. What we actually own is an IOU from our broker-dealer--a contractual right to the shares instead of the real thing. Your broker, in certain circumstances, has the right to conjure and sell you IOUs to more shares than actually exist.
In other words, the US legal system made a policy decision to favor liquidity over solvency--to favor negotiability of securities over keeping accurate and timely records of who really owns what.
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