uptick rule

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Uptick rule

SEC rule that selling short is allowed only on an up tick.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

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.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
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Beyond Meat may see some additional selling pressure on Friday once short sellers are cleared from the uptick rule restrictions.
The Securities Industry and Financial Markets Association warned that the lack of exemptions for the opening and for market markers "could negatively impact orderly markets by causing increased volatility and uncertainty around the opening and close." As per the Wail Street Journal, James Chanos, the chairman of the Coalition of Private Investment Companies, said that "the unintended consequence of this rule will be an erosion of confidence at a critical time when the economic recovery is struggling to take hold." Bill Fleckenstein, who ran a short-only hedge fund that closed in 2009, said that "the lack of the uptick rule had nothing to do with the market collapse in 2008--it was bad policies all around that created that disaster."
Only a few people from the finance industry were in favor of the uptick rule's return.
Rule 201 was implemented without a pilot study, unlike the repeal of the previous uptick rule in 2007.
Duration of Price Test Restriction : Once the circuit breaker has been triggered, the alternative uptick rule would apply to short sale orders in that security for the remainder of the day as well as the following day;
Boehmer et al., after studying the effects of repealing the tick test, said that "we do not find any evidence that this more aggressive shorting activity destabilizes stock prices in any way, and in fact short sellers seem to be even more important contributors to efficient share prices after the uptick rule is removed." (47) Citing numerous studies, Jones wrote that [t]he empirical evidence is absolutely uniform....
We are also aware that it has been argued that there would have been less volatility had the uptick rule been kept.
The SEC says it "particularly seeks comments on the alternative uptick rule as a permanent market-wide approach, as well as whether the alternative uptick rule should be combined with a circuit breaker approach."
The uptick rule stated that a short sale could only be sold at price higher than the previous sale, thus ensuring an uptick on the stock price.
According to a NASDAQ report, financial stocks saw the largest increase in short sales, rising 227.7 percent from July 2007--when the uptick rule was eliminated--to July 2008.
Along with the shrinking investment universe, poor returns and the problems with the uptick rule, that was enough to persuade us to drop the strategies from our portfolio in mid-1992.
After a spate of bear raids in the 1930's, the SEC enacted rule 10a-1, known as the "uptick rule", requiring short trades to be made only when the stock price is increasing (Alexander & Peterson, 1999).