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Uptick Rule

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Uptick rule
SEC rule that selling short is allowed only on an up tick.

Rule 10a-1
An SEC rule that formerly prohibited a short sale except on a plus tick or a zero plus tick. That is, Rule 10a-1 disallowed short sales at a price below the price at which the security traded most recently. This rule was intended to prevent short sellers from artificially deflating a security's price so that it harmed other investors. It was also called the uptick rule. It was replaced by Regulation SHO in 2007. Some have argued for its reintroduction.

uptick rule
An SEC rule that prohibits the sale of borrowed stock when the last price change in the stock was downward. Part of the Securities Exchange Act of 1934, the uptick rule is designed to keep investors from manipulating stock prices downward by borrowing and selling shares in a declining stock. See also short sale.


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S7-08-09, Amendments to Regulation SHO), to address two approaches in short sale trades, the reinstatement of the uptick rule, which prohibits short selling securities unless there is an uptick, and the circuit breaker concept that would either ban the short sale of a security for a day or impose a price for the security.
If a stock declines, say, 10% within a day, then a circuit breaker might kick in and either that stock couldn't be sold short for a period of time or maybe then an uptick rule kicks in for that stock.
This uptick rule governed the market since 1937 and basically stated that in order to short a stock you must first wait for the stock to trade up a penny before selling borrowed shares.
 
 
 
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