SEC Brings Back the Uptick Rule, But This Time It's Different
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After a long debate, the SEC voted 3-2 in favor of the "alternative" uptick rule which will seek to limit short selling on stocks that drop by 10 percent or more during a single trading session.
Under the rule, a circuit breaker would be triggered any time a stock has dropped 10 percent in a single day. At that point, short selling would only be permitted in a security if the price is above the current national best bid.
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.
The rule is similar to the original uptick rule that was in existence from 1938 until it was abolished in 2007. Under the original uptick rule though all short sales required an uptick. Now it will only be when a stock drops 10% during a single session.
SEC Chairman Mary L. Schapiro said, "I believe the alternative uptick rule strikes the right balance."
Under the rule, a circuit breaker would be triggered any time a stock has dropped 10 percent in a single day. At that point, short selling would only be permitted in a security if the price is above the current national best bid.
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.
The rule is similar to the original uptick rule that was in existence from 1938 until it was abolished in 2007. Under the original uptick rule though all short sales required an uptick. Now it will only be when a stock drops 10% during a single session.
SEC Chairman Mary L. Schapiro said, "I believe the alternative uptick rule strikes the right balance."
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