Questions about the uptick rule

Discussion in 'Trading' started by Eliot Hosewater, Feb 25, 2009.

  1. The idiots are talking about re implementing the uptick rule for shorting, like it's going to fix all the problems with the stock market. I have two questions about it.

    1. Does this affect someone who is long and just wants to sell? Is it known at the time of the sale if it is a short sale?

    2. If you want to sell short, why can you not just put in a buy order for a tiny amount to get an uptick? You put in a sell order then a buy order that would trigger the sell.
     
  2. I'm sorry I cannot answer your questions (I don't know the answer) but where did you read that this rule is coming back?
     
  3. Syprik

    Syprik

    While they're at it with this bologna, they should implement a downtick rule when going long :) Equal rights both directions.
     
  4. tradersboredom

    tradersboredom Guest

    it'll b e a lot difficult to short stocks cause you can't hit the bid to short the stocks.

    your sell order (short order) must be bought by somebody. bought at ask.





     
  5. Bernanke was talking about it today.

    http://www.bloomberg.com/apps/news?pid=20601087&sid=a5.dyHLeI8a0&refer=home

    Bernanke Says There May Be Benefit to Uptick Rule (Update1)
    Email | Print | A A A

    By Jesse Westbrook

    Feb. 25 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke said there may be a benefit in resurrecting a rule that restricts short-selling stocks when share prices are falling amid the current bear market.

    “In the kind of environment we have seen more recently” the so-called uptick rule “might have had some benefit,” Bernanke said in testimony before the House Financial Services Committee today. The rule, scrapped by the U.S. Securities and Exchange Commission in 2007, barred investors from betting against a stock until it sells at a higher price than the preceding trade.

    Bernanke’s comments may give credence to lawmakers such as U.S. Representative Gary Ackerman, a New York Democrat, who blamed the rule’s elimination for triggering attacks on financial stocks. The Standard & Poor’s 500 Index has tumbled 50 percent since the SEC dropped the uptick rule 16 months ago. New SEC Chairman Mary Schapiro said in January she may resurrect the provision.

    The SEC approved the rule in 1938 to prevent bear raids on companies. The agency eliminated the regulation after studying its effect on share prices and determining it was no longer relevant in markets dominated by fast-paced electronic trading.

    Executives at UBS AG, Deutsche Bank AG and Knight Capital Group Inc. said in December that bringing back the rule wouldn’t reduce volatility in stock prices.

    Studies by the SEC’s division of Trading and Markets also concluded that operational issues at brokerages would make it “impossible” to reinstate the rule, according to a Jan. 20 letter that former SEC Chairman Christopher Cox sent to Ackerman.

    Cox’s Effort

    Cox, in the letter, said he tried to introduce a modified provision that would allow traders to short a company only at a price that was a few cents higher than the best bid for the stock. Cox said he lacked a majority of votes among his fellow SEC commissioners in “proposing some modernized variant” of the uptick rule.

    Regulators from Washington to London last year cracked down on short selling, in which traders borrow shares and then sell them in the hope of profiting by buying the stock back later for a lower price.

    The SEC temporarily banned all bets that financial stocks would fall and is forcing hedge funds to reveal to the agency stocks they’ve sold short. In London, a Financial Services Authority prohibition on shorting 34 U.K. financial companies lapsed last month.
     
  6. zdreg

    zdreg

    it is hard to believe you don't know but then again...

    the problems with creating your own uptick is that if you create an uptick you still might not be able to get your order off.
    nasdaq never had an uptick rule. it had an upbid rule which works to the advantage of a short seller.
     
  7. 1. Does this affect someone who is long and just wants to sell? Is it known at the time of the sale if it is a short sale?

    2. If you want to sell short, why can you not just put in a buy order for a tiny amount to get an uptick? You put in a sell order then a buy order that would trigger the sell.
    --------------------------------------------------------------------------

    (1) If you are long and want to sell the uptick rule does not affect you. Yes, it is known at the time of sale if you are short. The ticket must be marked as a short sale.
    (2) I would not advise you to place orders in this manner. They have a regulation concerning what the regulators call manipulation on which they strictly enforce.

    Two points of interest concerning the short sale rule. It is only applicable to trades executed on an exchange market and not OTC. Also, it is commonly known as an 'uptick' rule but it does not have to be an uptick trade but a "zero" or "zero plus" from an uptick transaction. For example, if the actual trades were: 35, 34.99, 35, 35.01, 35.01and 35 you could sell short on the second 35 and both 35.01 ticks.

    Let's hope they do not place the uptick rule back in effect.
     
  8. I'm sorry, forum troll, as I've stated - I don't know, like 500 times on this forum - I trade forex. There's no uptick in forex.
     
  9. zdreg

    zdreg

    control your name calling and learn how to hit the trading button instead of the delete button.
     
  10. I call a "spade" a "spade".

    And wouldn't it be simple if there actually was a "trading" button.

    By the way, how's that banana republic call going that you made 3 or 4 years ago?
     
    #10     Feb 25, 2009