May 16, 2009
I am familiar with the bear raids on the NYSE in the late 1920s. The uptick rule was created in the 1930s to keep speculators from destroying companies and to lessen the chance of financial panics. During the financial panic of 2008, bear raids returned. Speculators had too much selling power for two reasons:
1. The uptick rule was not being enforced.
2. Speculators were selling stock short without having to borrow stock to cover.
Please look at the regulation of speculator on the buy side. The Fed regulates the amount of money available to speculators to buy stock on margin. You should be well aware of what happened when speculators only had to put up 10% in the 1920s. Too much speculation led to the Crash of 1929. More reasonable margin requirements currently exist, 50%.
The SEC and the Fed should treat both types of speculation equally, buyers and sellers. Allowing speculators to sell stock that does not exist is like allowing speculators to buy stock with money that does not exist. Both financial sins can lead to financial panics. In fairness, you should be regulating buyers to the same extent you are regulating sellers: Enforce the uptick rule and require short-sellers to borrow real stock.