February 20, 2010
The Proposed Circuit Breaker Rule, C, is a disaster. If we have another run on a stock like Bear Stearns or Lehman Brothers, the delay in trading imposed by this rule would just allow short sellers time to reload their electronic trading systems to hit the stock once again when trading resumed. This rule may be a useful addition to proposals A or B.
Electronic trading systems should not be exempt from any uptick rules.
A better uptick rule would be one offered by Senator Schumer that imitated the rule as it was before penny spreads started. Require a 5 or 10 cent increase in the stock price before a short sale could be initiated.
Naked short selling must be disallowed, scrupulously monitored, and severely punished.