When we speak of a history of short selling I would venture to say that all early short selling was naked short selling where no one said that they did not own the shares to sell them; but just sold and then covered later.

This would have been in the days of the financial robber barons who used their strength to manipulate markets to their advantage.

Only when the extent of the problem was apparent and that smaller shorters might default on delivery on a long term basis were any rules set in place to insist that shares were borrowed through ones broker. This of course affects the small shorter and especially so in Canada.

In the US with big shorters there is still the real problem of failures to deliver - which I believe to be really big parties engaging in very large volume Naked short selling

For those interested in shorting and Naked shorting here are two interesting links from the USA which explains a great deal

http://www.deepcapture.com/

http://antisocialmedia.net/