A few weeks ago I emailed the SEC regarding complaints (From Cramer and others) about the SECs elimination of the uptick rule.
The following are excerpts from their response to me. Note especially the third paragraph. (Volatility is international)
"The Commission's decision to eliminate the uptick rule was taken only after an extensive real-world analysis of the impacts and shortcomings of then-existing short sale regulation.
The Commission's Office of Economic Analysis (OEA) studied the impact of the tick test by analyzing real securities, trading on live stock exchanges. Using one-third of the stocks in the Russell 3000 index, OEA created two groups of comparable securities, including both listed and NASDAQ securities. The control group was subject to tick tests or bid tests, while the other group of stocks was not. The OEA study, available at http://www.sec.gov/news/studies/2007/regshopilot020607.pdf, found that the elimination of the uptick rule increased the volume of short-selling, but did not increase overall short interest in a security.
Many have attributed the increase in volatility since the third quarter of 2007 to the elimination of the uptick rule. However, the increase in volatility is an international phenomenon. Market volatility has increased significantly, not only in the United States, but in several countries in which price tests similar to the U.S tick test remain in effect, including Japan, Australia, Canada and Korea.
We continue to investigate cases of manipulation in which short selling may play a role, and ask that you alert us to any evidence of manipulative conduct as soon as you become aware of it. "
The following are excerpts from their response to me. Note especially the third paragraph. (Volatility is international)
"The Commission's decision to eliminate the uptick rule was taken only after an extensive real-world analysis of the impacts and shortcomings of then-existing short sale regulation.
The Commission's Office of Economic Analysis (OEA) studied the impact of the tick test by analyzing real securities, trading on live stock exchanges. Using one-third of the stocks in the Russell 3000 index, OEA created two groups of comparable securities, including both listed and NASDAQ securities. The control group was subject to tick tests or bid tests, while the other group of stocks was not. The OEA study, available at http://www.sec.gov/news/studies/2007/regshopilot020607.pdf, found that the elimination of the uptick rule increased the volume of short-selling, but did not increase overall short interest in a security.
Many have attributed the increase in volatility since the third quarter of 2007 to the elimination of the uptick rule. However, the increase in volatility is an international phenomenon. Market volatility has increased significantly, not only in the United States, but in several countries in which price tests similar to the U.S tick test remain in effect, including Japan, Australia, Canada and Korea.
We continue to investigate cases of manipulation in which short selling may play a role, and ask that you alert us to any evidence of manipulative conduct as soon as you become aware of it. "
