> Isn't selling something you don't own a fraud or the stock market has an exemption?
I call up Dominos and order a pepperoni pizza. They take my order and process my credit card. They’ve just sold me a pizza that doesn’t exist. Is this fraud?
I call up Dominos and order a pepperoni pizza. They take my order and process my credit card. They’ve just sold me a pizza that doesn’t exist. Is this fraud?
No because they have the raw materials and labour to make a new pizza and have entered into a contract to do so.
Short sellers don't have raw materials to make new shares.
There's nothing special about shorting in your imaginary scenario either. You could change your scam to "I own Dominos stock and don't order any pizzas, but I put out articles claiming I ordered a million. People will buy up the stock expecting the profits from the million-pizza-order and I will pocket the money. These long holders are a scam"