May 29, 2009
Has the last year provided enough evidence that the uptick rule needs to be reinstated? Our company was the target of several bear short raids over the past year, as were many in the banking industry. And this short raid, without the uptick rule, led to significant declines and volatility in the value of our common shares. Much more than simple long positions selling their stock.
I picture two traders sitting across from each other, one is a short seller and the other a long buyer. If the long buyer knows the stock is going to plummet when his partner starts shorting a stock into oblivion, why would the long buyer jump in on the way down? They would wait until it levelled off, unless they expected another short sell hit to occur in the near future. -- this was reported to me by a hedge fund as exactly what occurs.
This rule was implemented long ago to help the small investor. I highly suggest it be reinstated to help the small investor in the future. No study at the height of the bull market could be reasonably relied upon to provide evidence the uptick rule should have been removed. Someone there should know better.