April 21, 2009
I think it is short sighted of people to place any blame on the loss of the uptick rule for the market's demise. It was simply an unfortunate coincidence that it was removed a year and a half too early. People would then realize that the end result of the decline would have happened anyway and to the same extent. The real culprits in this massive meltdown are the consumers who borrowed too much and the banks who lent too much as well as the endless creation credit derivatives. Until these problems work their way out of the system, there will be more meltdowns regardless of having an uptick rule in place. If you want real market stability, then regulate borrowing and lending to a much greater degree as well as credit derivatives. Bad companies deserve to be sold out of existence, otherwise you do not have a free market.
I think the proposed circuit breaker idea for implementing a modified uptick rule is sufficient to protect companies from abusive short selling and to allow the market to move freely as well.