brokerboy: I'm familiar with the products. What I'm asking is why conversions do not violate the spirit, if not the letter, of the SEC ruling that killed bullets. From my reading of that decision at the time, it seemed that having a longer time to expiration did not make a difference. (BTW, I'm not attempting to be Socratic here. I do not know whether they are legal or not. That's why I'm asking.)
There are a lot of reasons why conversions should be part of the marrieds ban BUT there are also a lot of elements why they fall outside. It is so gray everyone using them is taking a big chance and everyone NOT using them is taking a big opportunity cost chance (i.e. not making money hitting bids when maybe one day SEc will say it is ok) If you read the SEc letter there are certain elements of conversions which render them ok such as absence of the contraparty i.e essex radex or susquehanna since the conversons are OCC cleared. Another issue is the presence of risk i.e. pin risk, BUT conversions used for hitting bids clearly violate the sppirit of the law. Again conversons are in no man;s land. illegal in a lot of ways but legal in others.
"why can't people sell on downticks on equities. most other markets allow it??" in a mook trading world seeking efficiency, the uptick rule in equities creates opportunities cos it facilitates inefficiency.