September 11, 2011
Please reinstate the uptick rule, for all the reasons below, As for naked short selling, pleas abolish... Why would someone be able to borrow stocks to freely destroy the credibility of our market is beyond me.
editCalls for reinstatement
On August 27, 2007, the New York Times published an article on Muriel Siebert, former state banking superintendent of New York, "Wall Street veteran and financial sage", and, in 1967, the first woman to become a member of the New York Stock Exchange. In this article she expressed severe concerns about market volatility: Weve never seen volatility like this. Were watching history being made. Siebert pointed to the uptick rule, saying, The S.E.C. took away the short-sale rule and when the markets were falling, institutional investors just pounded stocks because they didnt need an uptick."11
On March 28, 2008 Jim Cramer of CNBC offered the opinion that the absence of the uptick rule harms the stock market today. He claimed that reintroducing the uptick rule would help stabilize the banking sector.12
On July 3, 2008 Wachtell, Lipton, Rosen Katz, an adviser on mergers and acquisitions, said short-selling was at record levels and asked the SEC to take urgent action and reinstate the 70-year-old uptick rule.13 On November 20, 2008, they renewed their call stating "Decisive action cannot await ... a new S.E.C. Chairman. ... There is no tomorrow. The failure to reinstate the Uptick Rule is not acceptable." 14
On July 16, 2008, Congressman Gary Ackerman (D-NY), Congresswoman Carolyn Maloney (D-NY) and Congressman Mike Capuano (D-MA) introduced H.R. 6517, "A bill to require the Securities and Exchange Commission to reinstate the uptick rule on short sales of securities."15
On September 18, 2008, presidential candidate and Senator John McCain (R-AZ) said that the SEC allowed short-selling to turn "our markets into a casino." McCain criticized the SEC and its Chairman for eliminating the uptick rule.16
On October 6, 2008, Erik Sirri, director of the Securities and Exchange Commission's Division of Trading and Markets, said that the SEC is considering bringing back the uptick rule, stating, "It's something we have talked about and it may be something that we in fact do."17
On October 17, 2008, the New York Stock Exchange reported a survey with 85% of its members being in favor of reinstating the uptick rule with the dominant reason to "help instill market confidence".18
On November 18, 2008, the Wall Street Journal published an opinion editorial by Robert Pozen and Yaneer Bar-Yam describing an analysis of the difference between regulated and unregulated stocks during the SEC pilot program. By using an analysis they claimed to be more comprehensive than the SEC's original study, they showed that unregulated stocks have lower returns, with a difference that is both statistically and economically significant. They also reported that twice as many stocks had greater than 40% drops in corresponding 12 month periods before and after the repeal.19 20
On January 20, 2009, Ackerman received a letter from Chairman Cox—written the day he left the SEC—in which Cox said he supports the reinstatement of an uptick rule. The letter reads, I have been interested in proposing an updated uptick rule. However, as you know, the SEC is a commission of five members. Throughout 2008 there was not a majority interested in reconsidering the 2007 decision to repeal the uptick rule, or in proposing some modernized variant of it. I sincerely hope that the commission, in the year ahead, continues to reassess this issue in light of the extraordinary market events of the last several months, with a view to implementing a modernized version of the uptick rule.21
On February 25, 2009, Chairman of the Federal Reserve, Ben Bernanke in testimony before the House Financial Services Committee stated he favored the SEC to examine the restoration of the uptick-rule.22
On March 10, 2009, the SEC and Congressman Barney Frank (D-MA), Chairman of the Financial Services Committee announced plans to restore the uptick rule. Frank said he was hopeful that it would be restored within a month.2324
editProposals for restoration of the uptick rule
On April 8, 2009, the SEC voted to seek public comment on the following proposals to restore a form of the uptick rule.8
The SEC disclosed the 273 page text of the proposals on April 17, 2009.25 The comment period closed on June 19, 2009.
Market-Wide, Permanent Approach:
Proposed Modified Uptick Rule: A market-wide short sale price test based on the national best bid (a proposed modified uptick rule).
Proposed Uptick Rule: A market-wide short sale price test based on the last sale price or tick (a proposed uptick rule).
Security-Specific, Temporary Approach:
Circuit Breaker: A circuit breaker that would either:
Ban short selling in a particular security for the remainder of the day if there is a severe decline in price in that security (a proposed circuit breaker halt rule).
Impose a short sale price test based on the national best bid in a particular security for the remainder of the day if there is a severe decline in price in that security (a proposed circuit breaker modified uptick rule).
Impose a short sale price test based on the last sale price in a particular security for the remainder of the day if there is a severe decline in price in that security (a proposed circuit breaker uptick rule).