May 5, 2009
My comments on the listed proposals are that neither the uptick or the ban approaches specifically address what I see as the true cause of the problem which is "naked" short selling.
As an investor who invested "long" in Citigroup and AIG more than twice on their way down, the velocity that these stocks were attacked with on certain days left retail investors who were working 9-5 limited to no opportunity to sell during the day. A long investor is buying into an existing entity. A covered short has borrowed an existing security and incurred a liability. Both of these are real. A naked short is no different than a bet in a casino. Nothing real has been created, the security they sold does not exist and the damage they do to "existing" enterprises is incredible.
In terms of your current proposals, I would support a national priced uptick rule combined with a ban on short selling for the day after a percentage price drop. I believe you need both rather than one or the other.
However I believe neither of these will accomplish much without a complete ban on "naked" short sales, with minimal or no exceptions. In the current environment an "individual" or group of investing entities has enormous financial resources to throw at or attack a particular security which just can not be offset by general market forces. This is market manipulation.