This is going to be a short diary wherein I post some info about the Uptick Rule.
The wikipedia gloss on it.
http://en.wikipedia.org/...
Some criticism of the SEC for removing it:
http://www.nationmaster.com/...
And some more timely feedback on the issue:
http://www.internetnews.com/...
Wikipedia says:
The uptick rule is a securities trading rule used to regulate short selling in financial markets. The rule mandates, subject to certain exceptions, that when sold, a listed security must either be sold short at a price above the price at which the immediately preceding sale was effected, or at the last sale price if it is higher than the last different price. In 1938, the SEC adopted the uptick rule, more formally known as rule 10a-1, after conducting an inquiry into the effects of concentrated short selling during the market break of 1937. [1]
In April 2008, a letter was written to the SEC:
April 27, 2008
In 2007, the SEC eliminated the "Uptick Rule" stating that there is sufficient liquidity in the market place to make an "Orderly" market without the rule. I find it incredible that, at that very time, a huge "Liquidity" crisis was developing before the eyes of the SEC. Why was it important for the SEC to make the change at that particular time? Were there hordes of investors pleading with the SEC to eliminate the "Uptick Rule? I think not. On the other hand: Did the SEC buckle under to pressure from the hedge funds to eliminate the "Uptick Rule" so they could cover some of their losses in the impending liquidity crisis and down market which followed July 2007? I think, probably so. The elimination of the "Uptick Rule" has cost me many thousands of my retiremnt dollars. One only need look at the 33% short interest in SCRX, a strong, viable, profitable company to witness "FRAUD" in action.
From an article written a couple days ago:
The SEC revoked the rule based on pilot studies in a bull market, but in a bear market, it sure looks like the absence of the rule has brought a return of the 1929-style "bear raids" it was designed to prevent. Shorts piling in on the way down can accelerate a decline, the SEC reasoned way back in 1938. It sure looks like that's what we're getting here.
And....
A very tough market indeed. It's deeply oversold, and bearish sentiment is very high, but none of that has yet meant much to the market. If the gloom can lift just a little, the upside could be big.
I'm no expert, and I'm sure there's no one magic bullet solution to all this.
I just wanted to add this to the mix.