Tick-Test Rules

Tick-Test Rules

Restrictions on when a short sale may be executed. Tick-test rules dictate that a short sale can be made only in two situations:

1. When the price of the particular stock is higher than the last trade price (an uptick).

2. In a case where there is no change in the last trade price. The previous trade price must be higher than the trade price that preceded it (a zero uptick or zero plus tick)

Notes:

This rule is intended to prevent investors from destabilizing the price of a stock when it's falling. Also known as the short sale rule.

See also: Naked Shorting, Short, Short Covering, Short Interest, Short Interest Ratio, Short Interest Theory, Short Selling, Short Sale Rule, Short Squeeze, Zero Plus Tick

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Tick-test rules

SEC-imposed restrictions on when a short sale may be executed, intended to prevent investors from destabilizing the price of a stock when the market price is falling. A short sale can be made only when either (1) the sale price of the particular stock is higher than the last trade price (referred to as an uptick trade) or (2) if there is no change in the last trade price of the particular stock, the previous trade price must be higher than the trade price that preceded it (referred to as a zero uptick).