Much has been written about the new drive by the Securities and Exchange Commission (SEC) to eliminate naked short selling of stocks. (Read the Mogambo Guru scathing criticism here.)

Rick Pendergraft in Investor’s Daily Edge has no problem in principle with the clamp down on naked shorting. But it may create more problems than it solves.

If hedge funds and brokerages suddenly have to settle all unsettled short sells, they will have to sell assets to cover their naked shorts. Blue chips with high institutional ownership are most vulnerable…