By John Tamny of RealClearMarkets
While the recent rebound in share prices has perhaps reduced some of the more strident calls for its reinstatement, the abolishment of the uptick rule in 2007 is to many, part of the reason that stocks have struggled so much over the past year. Supposedly the alleged piling on among short sellers in down markets turned orderly share declines into routes.
That being the case, had the uptick rule been in place whereby bears could only have sold short shares whose price on the last printed trade had ticked upward, we could have supposedly avoided the sick-inducing market declines of the Fall. Notably, similar thinking carried the day during the Great Depression, and the uptick rule was created. The problem then was that it did not produce the desired effect when it came to improving the direction of markets.
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