April 28, 2009
The elimination of the uptick rule only served to further the perception that the SEC catered to the securities industry at the expense of smaller investors. It really doesn't matter whether or not this perception is true because in the markets, the old saying "Perception is reality" is actually true. As we smaller investors saw the market get hammered day after day, just before close, it was clear that the short sellers were having a field day. No knowledgeable investor thought that the short sales actually caused the market slide, but most of us believed that they exacerbated it. Investors got out and stayed out, believing that huge program traders manipulated the markets as they pleased.
There have been arguments that since securities are now quoted in pennies instead of fractions, the uptick rule did no good anyway. I don't know if this argument is true and, I suspect, neither does anyone else. But I think the best response to this line of reasoning is that, " Ok, then it shouldn't matter if we reinstate the rule. It'll make small investors feel better while having no effect on the big traders."
The uptick rule should be reinstated as it was, for everyone. I believe it will result in more orderly trading and help small investors' believe that the market place is a level playing field.