The Uptick Rule - Your Thoughts

T

tomahawk

My feeling is that it's a bad idea for the following reasons:

- it's an artificial speedbump to shorting, a valuable price-discovery mechanism

- without a comparable 'downtick rule' to even the playing field against bull raiders, it is clearly not market-neutral

- it diverts attention from the serious problem of NAKED shorting, which had much more to do with the rapid selloffs in stocks like BSC and LEH than the absence of the uptick rule
 
Quote from tomahawk:

My feeling is that it's a bad idea for the following reasons:

- it's an artificial speedbump to shorting, a valuable price-discovery mechanism

- without a comparable 'downtick rule' to even the playing field against bull raiders, it is clearly not market-neutral

- it diverts attention from the serious problem of NAKED shorting, which had much more to do with the rapid selloffs in stocks like BSC and LEH than the absence of the uptick rule
More...

they reinstated it??
 
Seems that greed and fear aren't exactly having the same scale in term of timeframe. If DOW took 5 years to go from 5000 to 10000, it takes only 6-12 months to come back where it was. So it's reasonable to have a little bit rule different on the Long and Short side. As long as short selling is permitted regardless specific condition imposed then it's ok. What is not ok is that short selling is completely banned.
 
have a feeling that the comments (from ppl like us) will be irrelevant.

there were a TON of regular people who submitted letters, comments, etc. to the sec when they opened the PDT rule for comments.

however, the impetus for this dopey rule came from higher-ups...

so you can guess the results.
 
For nearly 70 years we had an uptick rule in place and nobody complained. It was eliminated for a year and we had a near collapse in the market (coincidence or not). Suddenly reinstating policy is to be the killer in all short sale activities. Why?

1. Do short sellers rely heavily on pounding the bid? If so is that price discovery or market manipulation? What price is the discovery they seek?

2. At what point is short sellers constantly stepping in front of long sellers healthy?

I find it amazing how haard the short biased funds like Chanos have come out on this issue after stating for so long the uptick rule had no impact on his trading previously. And suddenly now that he is without it a reinstatement will damage his fund to no end? BS.
 
The SEC commissioner said she does not see evidence that the uptick rule is meaningful. This comment period is for show. The only way it gets reinstated is because of political pressure.
 
Quote from tomahawk:

My feeling is that it's a bad idea for the following reasons:

- it's an artificial speedbump to shorting, a valuable price-discovery mechanism

- without a comparable 'downtick rule' to even the playing field against bull raiders, it is clearly not market-neutral

- it diverts attention from the serious problem of NAKED shorting, which had much more to do with the rapid selloffs in stocks like BSC and LEH than the absence of the uptick rule
More...

1. When does valuable price discovery become manipulation?

2. There are more investors likely to panic in a falling market than a rising market because of the dynamics of the mental state of people and shear quantity of people involved. It takes a larger ratio of Buy to sell to recover a market falling. A stock falls on X Qty of sales. A stock recovers to equilibrium on 10X Qty of buy side shares. That is because there are more longs involved and thus more personalities to deal with.

3. The rapid sell off of naked shorts with no uptick is a double barrelled shotgun. Without creating policy that puts in some form of an Uptick rule and a mandatory pre-borrow is what is necessary. I definately like the fact that this rule proposal levels the playing field by eliminating any and all exemptions to short selling by market makers. There are many boiler room crooks out there abusing that exemption today naked shorting into downticks and calling it 'bona-fide' market making when it is in fact manipulation.
 
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