What is the “uptick rule”, and how does it worK, or not work?
The Uptick Rule by Wade Young on March 12, 2008 The uptick rule is a former financial regulation that was eliminated by the SEC, effective July 6, 2007. Established after the great crash of 1929, the uptick rule was designed to restrict short selling by permitting short sales only following a trade where the traded price was higher than the previously traded price (uptick). Let’s take a stock that was trading at $100 per share with the last two trades at $99.75 and $99.50, respectively. If you wanted to go short on that stock, you would need to wait for the uptick — until the stock went up from $99.50 to $99.75, for example. Then you could go short. The uptick rule was in place to stabilize the marketplace, its job to keep the market from going into a downward, out of control spiral. It was also designed to prevent unscrupulous hedge fund guys from “pushing” the stock down by shorting, shorting, and shorting again. The uptick rule played an important role in warding off volatility in t
