SEC approves alternative uptick rule. It only comes into effect if the stock drops 10% in a day, in which case it can only be sold short on an uptick. Longs of course can always sell at any price under any circumstance. It resets the next day so in that case the curbs are 10% again from the closing price of yesterday.
i hope the govt realizes that stocks that cross the 10% threshold are going to go down even further than they would have without short sale restrictions.
I believe they frown upon using bullets to short stocks that are down > 10% to get around the uptick rule. I am not sure...
I don't see how they'd know or care or what "they" would do about it. This is one of the reasons why I stopped trading stocks altogether. Stocks that drop 10% are the very stocks that get my attention. Then I apply one of my bearish option setups depending on market conditions.
Uh, it is easy. Stock > 9.99%. Trader has a DIM put. Trader hedges with stock (or trader gets a position as a spread that has those two components at once) Guess what, you are 95 delta to want to get around the uptick rule. If it is illegal, it is up to your broker/clearing firm to be vigilant, and they will jump all over you if they see it because they are audited and can get monster fines if caught. You think you can get away with it if it is illegal? Try it. You will learn an important lesson. As I said, I don't know if they frown on bullets on stocks down >10%, but I would check if I were you.
Looks like the UT rule would be in effect for two days after a 10% decline in one day triggers it. http://www.sec.gov/news/press/2010/2010-26.htm That's ridiculous imo. If that is the case, they should also say if it bounces by 15% while the UT rule is in place, a downtick rule would come into play where you cannot buy long except on a downtick. This would dampen both sides for two days.
The rule is a joke and everyone knows it. However, it is much better than bringing back the old uptick rule. So I guess a good compromise. But anyone who thinks this is going to calm markets in times of panic is just horribly misguided. If I had to guess, this will only cause the down moves in stocks to be more severe after the 10% cutoff since there will be no more short buffering at that point. If the people at the SEC had any clue, they would just enforce the naked short selling rules that are already on the books. Then there would not be any need for this new uptick approach. But no, the SEC continues to amaze me at how inept they are at accomplishing their stated goal:
That is not exactly correct. It can actually still be sold short and will be by the largest players. The market makers are still able to short as part of "making a market" (think of the cash the CBOE kids are going to make) This "rule" applies to the outsiders. The only people that wanted the rule are those that will have to live with the rule. Welcome to being a second class citizen and trying to compete with a non-level playing field.