June 22, 2009
After reading the entire transcript of May 5th Roundtable, I was shocked that all three academic "experts" were blind to see (or did not want to see due to their bias) that the pilot study prior to the uptick rule elimination was extremely poorly designed. Because of its poor design, the results of this study are extremely unreliable for the following reasons:
1. The study was done during a bull market (there are not bears raids in a bull market), but the uptick rule is designed to prevent bear raids during a bear market.
2. The study was not well publicized. Most of the traders and potential "bear raiders" were not aware that they could short these stocks aggressively without the uptick rule as a result, the study stocks were not bear raided.
3. Even the hedge funds that knew about the study avoided bear raiding these stocks because they did not want to leave "fingerprints" on the stocks that were subject to data collection and close monitoring by SEC. On the contrarily, the bear raiders avoided the stock that were under study.
How can anybody trust the validity of this study and make any conclusions that "the uptick rule was not needed because it was not working"?