April 11, 2009
I believe a permanent uptick rule is necessary to help prevent and curve abuses. It would also decrease the volatility of a downward spiral created by a concentrated effort of short selling.
Its my opinion that a circuit breaker rule would not work. For one, it is only a temporary halt to any abuses, and the practice would be repeated the following day. With a circuit breaker set at a ten percent and with a concentrated effort of short selling, a stocks price could be cut in half in five days. In addition, investors knowing the stock is under attack would flee creating even more volatility.
It is difficult to invest knowing that your investments may be cut in half in one or in fives day. If a stock price declines, it should be with some order and not through manipulation. Investors who sell their stocks should have an opportunity to sell base on facts and not fear.
My preference would be the original uptick rule, but some form of a permanent uptick rule would be better than none.