Uptick rule may return, Rep. Barney Frank says....

Discussion in 'Wall St. News' started by Robert Weinstein, Mar 10, 2009.

  1. http://paid2trade.com/?p=741

    In a showing of how little he understands the free market and/or is totally in the pockets of Wall St. (market makers and specialists are exempt ) Barney Frank and others that are members of the house Financial Services Committee stated that they expect the uptick rule to be in place again in about a month.

    The SEC itself who is mostly in bed with the big houses on Wall St. stated no evidence that stocks fall further without the uptick rule.

    What this rule will mean is that YOU will not be able to sell unless there is a higher bid or a higher price posted but market makers WILL be able to. This is the primary reason why it doesn’t matter to the price of the stock if the uptick rule is in place or not as the price of the stock WILL go to the natural price it should. Its just a matter of WHO makes the money from wanting to short it.

    This is one more way how regulation will decide who makes money and who does not. Frank says he spoke with SEC chair Mary Schapiro and is hopeful that it will be back in place. Nevermind that it doesn’t change anything for the price of the stock. It feels good to have it in place and with Jim Cramer needing an excuse (easy scapegoat) to blame why the stock market doesn’t only go up this will probably pass.

    I have to wonder if Jim Cramer is trying to help out his friends more that are market makers / specialists or using this because his followers for the most part are not reading the details and he can get away with it.

    The free market works fine and the SEC knows it. You can not make the market go up forever regardless of what you do and they know it. They just want to make sure when it does go down that THEY are the ones that can profit at the expense of the smaller trader/investor.

    Here is the article on MSN money from Thomson Reuters

    http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=OBR&date=20090310&id=9683515

    WASHINGTON (Reuters) - The possible return of the “uptick” restriction on short-sellers of shares and the prospect of changes in an accounting rule that has forced banks to take billions of dollars in writedowns, sent U.S. shares higher on Tuesday.

    U.S. Federal Reserve Chairman Ben Bernanke said he supported the mark-to-market accounting goal of making financial balance sheets as transparent as possible but thought there was room for improvement.

    “It’s one of the things that tends at times to increase the severity of ups and downs in the financial system and the economy,” he said in response to an audience question following a speech to the Council on Foreign Relations.

    Barney Frank, who chairs the U.S. House of Representatives Financial Services Committee, predicted changes to mark-to-market given Bernanke’s comments and said he hoped the uptick rule would soon be reinstated by the Securities and Exchange Commission.

    “I’ve spoken to Chair (Mary) Schapiro of the SEC. I am hopeful the uptick rule will be restored within a month,” Frank told reporters.

    U.S. shares were up about 5 percent as financial stocks got a boost from the regulatory developments and Citigroup said it was profitable in the first two months of 2009.

    The SEC later confirmed it would consider reviving the uptick rule.

    “The Commission may conduct a public meeting as early as next month to consider whether to formally propose reinstatement of the uptick rule, or consider other measures related to short sales,” said SEC spokesman John Nester.

    Senate Banking Committee Chairman Christopher Dodd said he backed the SEC reinstating the uptick rule “I wish they’d do it quickly,” the Connecticut Democrat told reporters.

    The uptick rule, adopted after the 1929 stock market crash, allowed short sales only when the last sale price was higher than the previous price. The SEC abolished the rule in 2007, after concluding that advances in trading strategies rendered it ineffective.

    Short-selling is often blamed for precipitous declines in certain stocks but short-sellers defend their role, saying they prevent shares from becoming overvalued.

    The SEC adopted emergency restrictions on short-selling last year but the measures were judged by some market watchers to have been largely ineffective.

    Short-sellers borrow stocks they expect will fall in price in the hope of repaying the loans for less and pocketing the difference.

    REGULATORY REFORM

    Bernanke also said leaders from the Group of 20 rich and developing economies should agree early next month on principles to guide nations as they revamp financial rules to prevent future crises.

    Finance ministers from the G20 meet this weekend in London to lay the groundwork for an April 2 leaders summit where regulatory reform is expected to feature prominently.

    “It’s asking too much for a meeting like that to come out with detailed proposals in many different areas,” Bernanke said.

    Bernanke’s remarks come two days before a U.S. House Financial Services subcommittee is scheduled to meet to consider possible changes to the mark-to-market rule.

    Business groups have been pleading with the SEC and the Financial Accounting Standards Board to suspend or amend the rule so banks can account for hard-to-value assets more favorably amid distressed markets. The banking industry says the rule is undermining the federal government’s $700 billion program to stabilize the financial industry.

    But the SEC, which oversees and enforces accounting policy, is “not planning a suspension,” of mark-to-market, a source familiar with the matter told Reuters. The source was not authorized to speak on the matter and requested anonymity.

    The SEC declined to comment.

    GUIDANCE NEEDED

    Bernanke emphasized that he was opposed suspending mark-to-market accounting, but “given what is going on in the world, we should look to identify the weak points of mark-to-market and try and make some improvements on a more expeditious basis.”

    “We need to do a lot more to provide guidance to the financial institutions and to the investors about what are reasonable ways to address valuation of assets that are being traded or if traded at all in highly illiquid, fire-sale type markets,” Bernanke added.

    Congress does not have the power to make outright changes in accounting rules. The SEC and the Financial Accounting Standards Board have said they are working on more guidance to help banks determine values of assets in illiquid markets.

    Thursday’s hearing, to be chaired by Pennsylvania Democrat Paul Kanjorski, will try to find “fair-minded, incremental and achievable fixes” to the mark-to-market accounting rule, the lawmaker said last week.

    But the top Republican on the Senate Banking Committee, Richard Shelby of Alabama, said he opposed easing the mark-to-market rule.

    “Accounting rules should be designed to ensure that a firm’s disclosures reflect economic reality, however ugly that reality may be,” Shelby said at a committee hearing on investor protection issues.
     
  2. Uptick or not uptick rule, if market wants to go down it will no matter what. The market goes down for no other reason but because the buyers see no value in it.
     
  3. scd

    scd

    I agree. Markets take the path of least resistance.
     
  4. I agree but it appears you did not read what I wrote.

    What matters is WHO can short and WHEN. A stock may go down as it will either way which we all agree on. But it will be the market makers that are shorting at the best prices and at the best times while the retail and non Wall St. traders are shut out.

    Its NEVER been a short uptick rule, its always been a PARTIAL short sale rule that applies ONLY to non market makers/specialists.

    This is an example of how regulation decides who wins and who doesn't.
     
  5. Is it mere coincidence that the market stabilized and eventually recovered in the 30s when the uptick rule was put into place, and after it was rescinded in 2007 (yes, after being in place for over 70 years) the market plummeted by more than 50%, wiping out the savings for millions and millions of investors?

    Was it a non-free-market for the 70+ years that the uptick was in place?

    The market will find it's way to the right value, with our without the uptick rule. Without the uptick rule, however, a small minority can manipulate prices (in the short run) for their benefit and to the detriment of the majority who invest and don't trade.

    And yes, I trade every day the market's are open.
     
  6. sprstpd

    sprstpd

    BS
     
  7. Yes... it's a coincidence.

    The technology is not even there to implement an "uptick rule" today...
    Because you have at least 10 legit market centers for a liquid stock...
    And black boxes trade with sub-millisecond latency...
    So ticks happen in nano-seconds...
    And there is no OFFICIAL centralized NBBO or tick.

    The speed of light actually comes into play here...
    When trades happen a thousand miles apart.

    At best...
    They will do a "pseudo-uptick" of the "NYSE Group" and "NASDAQ Group"...
    And there will be 100 exemptions to get around it...
    Big Players will be virtually unaffected...
    And low to medium volume stocks will become MORE illiquid and volatile.

    This is all for show...
    It will hurt a few small players...
    But have ZERO impact on the Bear Market.

    This Crisis was brought to you by Barney Frank...
    Who was a major force pushing for EZ mortgages for deadbeats...
    And now this idiocy is his "solution".

    My concern is IB...
    Which has a long history of misinterpreting regulations...
    And tends to choose Draconian implementations...
    Because that's usually easiest for their programmers.
     
  8. You may trade every day but you're still clueless.

    The first rule of statistics is correlation is not causation. The market did not stabalize and recover in the 1930's. The market took almost two decades to recover and the rule wasn't implemented until 1938 anyway - way after the crash and did absolutely nothing to reduce market volatility.

    Your assertion that the markets are down not because of too much leverage, bad investments and a popping asset bubble but because the uptick rule happened to have been repealed is truly hilarious. You do know that the bursting of the tech bubble, the crash of 1987 and the bear market in the 70's all happened while the uptick rule was in force? Of course you don't.

    Your dreams of market manipulation are truly entertaining. I challenge you to try to manipulate a stock price and see how fast you get your face ripped off. It's possible, but it requires thinly traded stocks and collusion among very deep pockets and is not worth it.

    That said, bring it back. The only thing the uptick rule ever did was create distortions in the market that specialists and market makers used to rape customer (particularly retail customer) orders. The elimination of it the uptick rule just made it harder to do that.

    The guy who said all it did was change WHO could short and WHEN is right. Customers like you were disadvantaged (unfairly) but it seems that you are the ones who want the disadvantage, so bring it on.
     
  9. Well put, Deedee.
     
  10. 1938 marked a low in the DJIA market, which moved up from there, only to retest it in 1942 (start of WWII), and never to be touched again. Coincidence? :)

    Don't lecture me on statistics. I understand fully well the difference between correlation and causation. My degree was in statistics and probability from Princeton - I'll be glad to discuss the derivation of Black-Scholes and it's inherent flaws any time (it assumes normal distribution of variance in stock prices).

    And 2 data points 1938 and 2007 mean nothing statistically.

    First, I was merely pointing out the coincidence. Second, I never said it caused this stock market crash. Surely, the crash is the result of a burst bubble (just like the tech one in 00-01). I only infer that the removal of the uptick rule exaggerates the moves to the downside to a greater magnitude than without it.

    As to the implementation of the rule, yes, I have no clue how that is done, but they managed to make it work until 2007. I only trade futures, so I don't care about the uptick rule (even if reinstating it reduces volatility). :)
     
    #10     Mar 10, 2009