Quote from nitro:
The reinstatement of uptick rule feels so wrong to me. People think they are getting something for nothing, but there is no free lunch in markets. For example, if the UT rule is reisntanted, option markets will automatically compensate for the rule by shifting option values. "Insurance" will likely become more expensive. Offers will go wide in stocks. I can't imagine all the ramifications.
The UT rule if reinstated will not apply to MMs. That means that the balance of power is once again shifted away from the small trader/investor. The democratization of markets will go backwards. It is like saying I want to turn back the clock to the dark ages.
But the most blatant objection towards the UT rules it that people are focusing on the symptoms and not the disease. Imo, all the reinstatement of UT rule does is allow the creation of a _stock_market_ pyramid scheme easier. It will create a bubble of it's own, this time without any outside help.
People don't realize that the stock market didn't implode because of some lack of an UT rule. It imploded because lack of rules in the rest of the market, Wall Street and Main Street. The phony profits created in the real estate and credit markets were instatiably invested in the stock market, which in turn fueled greedy fund managers to encourage more phony real estate money be sent their way so they can slice and dice it, creating more fees for themselves. This in turn fuled more real estate to be built, which in turn fueled more phony RE demand in the form of cheap credit standards, from the very people enticing the real estate bubble, Wall Street. It is worth saying again, this fuels greed uncontrolled because this greed created a positive feedback loop between the stock market and real estate/credit markets. This postive feedback fueled both asset classes demise because it was based on a false premise: real estate prices can't go down. When that phony money dried up, and the value of RE went down, it was a game of VERY fast musical chairs ni all asset classes. There is no regulation that controls greed.
Make rules that don't allow people to get "no doc loans" or other similar time bombs. Make a rule that says that 401K fund managers be held to some standard. Make rules that say 30:1 leverage is not allowed. Make rules that you can't sell $100 worth of insurance with $3 of funds backing it. Concentrate on the real problems. Innovate and the market will come back on it's own.
