I'm not a domain expert, but it would seem that whether or not something was sold naked is ultimately determined in the instant that you are obligated to deliver -- not doing so is a Failure to Deliver, which is when your problem actually starts.
There was no reason to not be ass-naked or close to it on the high end of GME call contract writing a few months ago. They've probably covered (at least partially) by now, but that doesn't mean it hasn't happened.
> I'm not a domain expert, but it would seem that whether or not something was sold naked is ultimately determined in the instant that you are obligated to deliver
No, this is not true. When you sell short (with some exceptions for market makers), you are obligated to "find" shares to borrow (called "locates"). Usually your broker arranges this; any shares that you borrow cannot be lent to someone else. If you do not have any borrowed shares (as recorded by the broker), that is considered a "naked short sell".
No idea why you're getting downvoted -- whether or not you're able to do it depends on if you are one of those exceptions and that is an important part I missed in my original post. I was referring to market makers, as I think it goes without saying that a retail investor or small firm will not be allowed to do something like write a naked or near-naked call, but you know what they say about assumptions.
E.g. A lends a share to B, B sells to C, C lends to D.
Now say another shorter, X, needs to cover their short and thus buys a share from C, now for this trade to settle C has to recall their share from D and then give it to X, who would then use it to cover their short. If D now fails to give back the share to C, then the trade between C-D is FTD which would then cause X trade with its borrower to be FTD since X needs C's share to settle it.
So they could have locates but still fail to settle. Though, I'm not unequivocally excluding that some naked shorts may have happened. I just find it more plausible than hedge funds and brokerages allowing huge amounts of naked shorts, which are already illegal.
The SEC has 170k recorded FTDs for GME in the second half of December 2020: https://www.sec.gov/data/foiadocsfailsdatahtm
GME has been on the NYSE Threshold list for months: https://www.nyse.com/regulation/threshold-securities
Multiple WSB users were aware of this public data and that GME had high FTD rates in significantly more favourable circumstances at least as early as October 2020: https://old.reddit.com/r/wallstreetbets/comments/j0ckgf/reg_... https://old.reddit.com/r/wallstreetbets/comments/jbvwek/fail...
There was no reason to not be ass-naked or close to it on the high end of GME call contract writing a few months ago. They've probably covered (at least partially) by now, but that doesn't mean it hasn't happened.