Where are the smart guys. What will happen to the Ultra-Short ETFs when the uptick rule gets reinstated? When & how good or bad?
Sorry, you must have missed to opening portion of the question you smart little NUMBNUT you. A change in the uptick rule is a "CHANGE". Traditionally, folks have a tendency to avoid change. IT AFFECTS PRICE PRICE AFFECTS "PURCHASE" Ya'll Surdo must no that
Many ultra ets use options or futures to gain leverage so the uptick rule affects their ability to easily short stock to hedge or leverage up but they will still be able to do what they do no problem. Most liquid stocks have upticks hundreds of times a day so they should have no problem jumping in to short if needed.
options and futures have no uptick rule, even so the ETF still trades on it's own accord, you still can go long when there is someone else willing to sell it.
Thank you, a good answer. You're sure right about the many upticks, I counted 49 upticks in 1 minute with CITI on a down day. I think we should remember that the rule was abandoned shortly after they did away with fractions. Remember when IBM sold for SEVEN & ONE EIGHTH or Xerox was NINE & THREE QUARTERS? One tick was 12.5 Cents. Unless they use some kind of percentage I can't see the change doing what they are hoping for. I want to short SIRI @ 0.345, will I have to wait for it to reach 0.35 (that would be an uptick) or wait for it to go up to 0.47 which would be equivalent to an old tick and a loss of 36% by not being long?http://www.elitetrader.com/vb/newreply.php?s=&action=newreply&postid=2379408# I've had a position in SKF since Friday night and I'm tempted to hold through today. However, the boys in charge are sounding like the rule will change before then. Do you think that the likes of SKF, SRS, Etc. will head South over it?
my firm has not been there yet. Last time they reinstated the uptick and instituted a short-ban list our ETFs had not yet launched... so i'm not 100% sure what will happen but I can venture a guess The ETFs you buy in the secondary market represent a basket of stocks. You own a small percentage of that basket - long or short. What essentially happens on the short side is that the share will begin to trade outside the basket because the SEC's ruling does not allow for an arbitrage opportunity to keep the shares in line with the underlying basket. If I remember correctly Proshares told me that their shares just traded based on pure supply and demand.
off course it's supply and demand, you'll only might not be able to short the short ETF that easily if they really reinstate the uptickrule everywhere, although I think they will make an exception to everything related to indices.
re-reading the OP's question. With the uptick rule I still don't know for sure how it will play out. I have heard that there are 4 different variations being proposed and who knows what will actually happen. If it's just uptick - nothing will happen. ETF shares will trade based on the values of the underlying securities. If it's short-sale ban list then that all depends on what's banned. Because this is mostly derrivatives it's different - even if you are in an uptick situation brokers are willing to honor the swap without a hedge - it usually ends up working out in their favor.