February 20, 2009
The uptick rule was devised in the '30s by Congress and the SEC following the Great Crash to prevent a repeat of it from ever occurring. They investigated the tactics used by market manipulators and installed the simple yet effective uptick rule -- a rule that "required short- sellers to wait until a buyer could be found to pay an uptick, meaning a higher price, before they could short a stock."
The government back then understood that buyers are smart -- they'd "vanish if they believed there was something wrong with a stock," like when sellers "want to get out so badly they'll sell at any price."
After Cox did away with this safeguard, short-sellers ran rampant, shorting stocks "all the way down" without needing to wait for buyers, which is what happened to Citigroup
Bottom line: "You want order restored, the markets to work again, an end to the endless sowing of fear? Then bring back the rules we put in place to avoid another Great Crash. The uptick rule wasn't broken, but the SEC 'fixed' it and put the 'fix' in for the shorts. It's time to give the longs back a level playing field, stop the rigging of the market by the shorts, and bring capitalism, not capital destruction, back to our markets."