Who Is Fighting Reinstating the Uptick Rule for Short Selling?


Quick Answer

Stock market traders who regularly engage in short selling generally oppose the 2010 reinstatement of an alternative uptick rule for short selling. Additionally, pure free-market proponents argue that regulation of short selling prevents the market from naturally balancing.

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Full Answer

The uptick rule, installed in 1938 by the U.S. Securities and Exchange Commission, prohibits short selling except when a stock price has been traded at a higher price at least once. Short selling, the practice of selling market securities, commodities and currencies not currently owned and expecting a rise in price and subsequent profit when the purchase is delivered, contributed to the significant drop of market prices during economic fluctuations in 1929 and 2008. It was repealed in 2007 and reinstalled in 2010 with the addendum that short selling on a downtick is allowed for stocks below a 10 percent decline.

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