Thoughts on the uptick rule?

Discussion in 'Trading' started by Red_Ink_inc, Aug 2, 2007.

  1. Just wondering what people's thoughts are on the removal of the uptick rule? Personally I think it's the greatest thing since canned beer. Nothing better than hammering bids in a falling market and moving people out of your way.

    I didn't have CNBC on (never do) but a buddy of mine told me today that Cramer was on bad mouthing the new uptick rule. Wondering if anyone saw it and could summarize what that putz had to say about it?
  2. I agree. It's like a sore d*ck. You can't beat it.
  3. Nice handle. lol
  4. B1010


    I missed it also but I just did an internet search. On this guys blog he's talking about what Cramer said. Pretty funny stuff. Cramer can really be a moron along with the rest of the cnbc club. Sounds like they were blaming part of the housing sell off on the new hybrid no uptick rule. Freakin hilarious. hybrid trade of the day
  5. Ted Weisberg on consecutive days on Bloomberg says, it's ill conceived. (It isn't . It's bought and paid for.)

    Floor trader today, Doreen Mareveno, said, it's terrible. We just keep hitting bids,. but it's terrible.

    Cramer, last Friday did the same.

    Take a step back, and look at the whole picture. It's another sham at the SEC. How come this gets thru, but they catch GS in big violations, and fine them a million dollars???

    Who is going to be left to trade with? Do you think some retail schmuck is going to do his "research", pick a stock, buy his thousand shares, and watch you pummel it? Stops are worthless.

    It's going to be lonely. The retail guy will disappear for a generation, just like 1968-1983.
  6. I love it.

    Before the uptick rule, I paid $17/thousand to circumvent the uptick rule. Basically, when I wanted to short stock, a third party black box would take an offer of mine which was instantaneously posted to an over the counter third market print ("T" prints) and then sell the stock in the market. I would be charged a commission of $17 for every thousand shares, plus the spread between where I was filled on my offer and where the black box got printed on its sell market order. For example, if the stock last printed on a minus at 65.93, I would press a hotkey and immediately an offer would be put on an over the counter market at 65.94, and a the black-box would immediately buy me. The box, now long the stock, would sell it in the market, at a loss. Whatever that loss was, I would be charged. If, for whatever reason, the market order was given price improvement over the price I was given on my third market uptick, I would be credited that spread. There was minimal lag associated with this process, but I could still get short within a small fraction of a second of pressing the button. It was kind of an edge. It let me take liquidity away from people who were long; I would short into stepping bids that get rapidly taken out, or in front of market short orders. However, paying $17/thousand was insane. My gross profits would be $12k in a month where my NET was -2k, or in a month where my net was $+4k, my gross profits were over $20k. I spent between $6,000-$9,000 to bypass the uptick rule.

    Before the hybrid market, someone could use the product I used to net $2-3k every day, consistently, by getting short in front of size stepping down on the offer. Afterwards, the profit potential of simply front running market shorts decreased by about 50%. A lot of non-skilled traders made great livings just bypassing the uptick rule. It was never publicly talked about, and the SEC never ruled against it. They ruled out bullets, which were about $.002/share but one bullet you could all day long; so a bullet for 3000 shares would cost $60; however, all day long, one could short that stock instantly at the bid. When there are large market short orders waiting to get filled, they must step down on the offer. They couldn't get filled on a minus, only on a plus tick, thus if someone wanted to short 100,000 shares, a 100,000 offer would have to drop in price to a price no lower than one penny higher than the last downtick. Someone with the bullets would be able to lean on the 100,000 share offer with absolute certainty, or as close to it as the markets give, especially if there was breaking negative news on the company. One day, the SEC made bullets illegal and many traders careers ended.

    However, the black-box products like SLIPS, etc. came along, and many different prop firms used variations of these legal black box products that circumvent the uptick rule and taught trading strategies based around front running market short orders. The fees were higher than with bullets, since you had to pay every single time you got short, but for between $17-35/thousand, one could get short at the bid anytime.

    Now it's so much easier. Since I don't pay $17/thousand to get short on a downtick, I can aggressively take liquidity for a profit without being ripped off.

    In my 7 months of trading under the uptick rule, through only 5 of which I used a product to circumvent the uptick rule, I must have paid over $15,000 for the right to do so.
  7. Will thats funny sounds alot lke one we used to have at swift called erco, cost 3 cents a share but it was the only way to sell a stock down if you needed too, but id gross like 3k using it and end up net like 1 and sometimes even net negative if i used it to much.
  8. I think it's great. Most on this forum tout a free market economy which we don't have in the US. Uptick rule, PPT, limit moves, and trading curbs. How is this free market?
  9. A free market is not getting fake locates and beating the hell out of legit bids. So you get to sell a thou at the bid. You don't think SAC and the boys will sell a million at the bid??? Why do you think they passed the original law in 1938??? /to stop bear raids. It's a bad rule. It's law, but it's bad.

    I've listened to Specialists tell me how they were threatened with naked shorting from Floor Brokers. It's basicall extortion. And so is this.
  10. My firm had erco, too, as a backup, but we didn't even bother using it - only two guys ever used it, because about 2% of the time our short product would go down or be shut off. Erco could only hit a three cent spread, though, whereas the product we used ("belx") would get you filled wherever you were printed. This meant that you could get bad fills as you couldn't use limit orders to enter short positions immediately, but it also meant you could tick a stock to make the offer step down and get short in front of it, and then after knocking the stock down, buying the offer yourself to cover your short and taking liquidity to go long to squeeze other people...

    with bel-x, you didn't know where you really got filled until a few seconds later when you had to click the refresh button on a webpage.

    Anyway, I find it a lot easier to make $1000-2000 trading stock intraday without any uptick rule than I did with it. My gross numbers are about the same, but I'm not paying the absurd commissions to enter short positions. I always like to enter long positions by taking offers and short positions by hitting bids because I like to take liquidity from other people in my entries; a lot of my short-side setups which worked best required me to short on a downtick. Even when I got into a trade based off of technical or longer term reasoning, I would still usually get a better fill paying .017 than shorting in the market, though not always. It also meant that I never had to work to get short; I could just wait for a market short to come in and hit a bid. I don't have to work now, either, to build a short position - and I don't have to pay absurd fees for it. I love the elimination of the uptick rule.
    #10     Aug 2, 2007