June 15, 2009
June 8th, 2009
Mrs. Elizabeth Murphy
Secretary, Securities and Exchange Commision
100 F Street, NE
Washington DC, 20649-1090
Re. File No: S7-08-09
Dear Mrs. Murphy,
Im very skeptical that reinstating the uptick rule would have much of an impact on the market. If you run a company poorly and irresponsibly the market will and should send your stock to zero. Bringing back the uptick rule does not change any fundamentals. It simply changes market mechanics and favors long investors. Pundits blame shorts for knocking down financial stocks but fail to mention huge mutual funds that are also selling the same stocks all around the world. Pundits blame recent market volatility on the removal of the uptick rule, but fail to look at every other asset class that has also had an increase in volatility. Look at currencies, commodities, bonds, private equity. The correlation in volatility is a reflection of how truly awful of an environment we are in, not because of some rule change in one market. As long as the underlying fundamentals are worsening, efficient markets should reflect this.
According to the SEC, the uptick rule wasnt really needed to prevent manipulation and actually seemed to reduce a stocks liquidity.
The general consensus from these analyses and from the roundtable was that the commission should remove price test restrictions because they modestly reduce liquidity and do not appear necessary to prevent manipulation, the SEC reported. In addition, the empirical evidence did not provide strong support for extending a price test to either small or thinly-traded securities not currently subject to a price test.
Isnt an increase in liquidity a good thing? It increases efficiency and benefits the individual investor.
Recent history indicates that market intervention to influence price action does NOT work. Remember the banning of shorting financial stocks? Certainly the market spiked higher for a day before making newer and newer lows.