Here Comes The Uptick Rule

We’ve been pretty sceptical about the idea that restoring the uptick rule would do a lot of good. It’s not clear that short-selling is the problem, and in fact even when short selling in financials was banned, things didn’t get much better.

At the same time, a restoration of the uptick rule might not do too much harm. And if it would get people to shut up about the uptick rule, it might be worth it.

It looks like it’s set to come back, not right away, but at some point this year. Mary Schapiro, the former FINRA head who now heads the SEC, is telling Congress today that her agency is interested in doing just that.

Obviously there are details to be worked out, such as how it’s going to work in the age of electronic trading, when a penny uptick means nothing. And there’s a technological angle.

In the meantime, we’ll reiterate our suggestion that we also have a downtick rule to prevent against “bull raids”. Afterall, over-optimism and equity bubbles are the real enemy.

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