I love it.
Before the uptick rule, I paid $17/thousand to circumvent the uptick rule. Basically, when I wanted to short stock, a third party black box would take an offer of mine which was instantaneously posted to an over the counter third market print ("T" prints) and then sell the stock in the market. I would be charged a commission of $17 for every thousand shares, plus the spread between where I was filled on my offer and where the black box got printed on its sell market order. For example, if the stock last printed on a minus at 65.93, I would press a hotkey and immediately an offer would be put on an over the counter market at 65.94, and a the black-box would immediately buy me. The box, now long the stock, would sell it in the market, at a loss. Whatever that loss was, I would be charged. If, for whatever reason, the market order was given price improvement over the price I was given on my third market uptick, I would be credited that spread. There was minimal lag associated with this process, but I could still get short within a small fraction of a second of pressing the button. It was kind of an edge. It let me take liquidity away from people who were long; I would short into stepping bids that get rapidly taken out, or in front of market short orders. However, paying $17/thousand was insane. My gross profits would be $12k in a month where my NET was -2k, or in a month where my net was $+4k, my gross profits were over $20k. I spent between $6,000-$9,000 to bypass the uptick rule.
Before the hybrid market, someone could use the product I used to net $2-3k every day, consistently, by getting short in front of size stepping down on the offer. Afterwards, the profit potential of simply front running market shorts decreased by about 50%. A lot of non-skilled traders made great livings just bypassing the uptick rule. It was never publicly talked about, and the SEC never ruled against it. They ruled out bullets, which were about $.002/share but one bullet you could all day long; so a bullet for 3000 shares would cost $60; however, all day long, one could short that stock instantly at the bid. When there are large market short orders waiting to get filled, they must step down on the offer. They couldn't get filled on a minus, only on a plus tick, thus if someone wanted to short 100,000 shares, a 100,000 offer would have to drop in price to a price no lower than one penny higher than the last downtick. Someone with the bullets would be able to lean on the 100,000 share offer with absolute certainty, or as close to it as the markets give, especially if there was breaking negative news on the company. One day, the SEC made bullets illegal and many traders careers ended.
However, the black-box products like SLIPS, etc. came along, and many different prop firms used variations of these legal black box products that circumvent the uptick rule and taught trading strategies based around front running market short orders. The fees were higher than with bullets, since you had to pay every single time you got short, but for between $17-35/thousand, one could get short at the bid anytime.
Now it's so much easier. Since I don't pay $17/thousand to get short on a downtick, I can aggressively take liquidity for a profit without being ripped off.
In my 7 months of trading under the uptick rule, through only 5 of which I used a product to circumvent the uptick rule, I must have paid over $15,000 for the right to do so.
