A simple question to Cox: Which side are you on? investors or hedge fund and what is the mission of SEC?
Help me understand how the "pro's" were able to abuse the recently departed uptick rule. What exactly were they able to do that they can't still do now?
uptick rule means you cannot short in a downtrend. you can't short or sell at ask when the price is going down.
uptick rule is not needed in bull markets but in illiquid markets you need the uptick rule from professionals shorts who are hedged with options etc taking liquidity from the market causing price to decline further.
The uptick rule does not prevent anybody from shorting in a downtrend... it just means that before you can short, you need 1 puny, measly, little uptick first. You know how many upticks you get in a downtrend? Just as many downticks as you get in an uptrend. I traded back in the days of the uptick rule and I can tell you with absolute certainty that the only people who were inconvenienced by this rule was Joe Blow the Average Retail Trader. Anyone who knew anything at all about the markets that was interested in shorting, would either box against their account, put on a conversion, or pick up a bullet. If you walked into any prop shop like Echo or Bright I guarantee you couldn't find very many traders that needed to wait for an uptick to put on their shorts. The idea that the regulatory agencies add and remove these rules to protect the public interest is a little far fetched IMHO... most of the time they're designed to further exploit the advantages and edges that the professional traders have over the retail traders.
The mission of the U.S. Securities and Exchange Commission is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation http://www.sec.gov/about/whatwedo.shtml There are many ways of creating synthetic shorts. At the time when the uptick rule was enforced, many prop traders were using conversion, and other methods to short without uptick. The uptick rule was unfair to retail investors. It created an competitive edge to institutions and prop traders. It is naive to think that uptick rule can stop hedge funds or prop traders from shorting. SEC mission is NOT to force the stock market to go up. The market should find its own fair market price, no matter how low it is. Period!!!
the uptick rule was a great way to see if a trader was holding up his bid and whacking everything under it, you cant do that now with regnms, but if you really wanted to get short on a downtick just cross the market with arca and bamm you put on a short no questions asked, no need to wait for an uptick