Uptick Rule

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    Posted: 25 March 2009 04:21 PM #1

    Reinstating the uptick rule will do nothing now that stocks trade in pennies or fractions of pennies.  You’d have to create a new rule requiring a sustained move (define that) in one direction before allowing a short position to be taken.  But we tried banning shorting as well so that won’t work either.

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    Posted: 25 March 2009 04:37 PM #2

    Mayor Quimby - 25 March 2009 07:21 PM

    Reinstating the uptick rule will do nothing now that stocks trade in pennies or fractions of pennies.  You’d have to create a new rule requiring a sustained move (define that) in one direction before allowing a short position to be taken.  But we tried banning shorting as well so that won’t work either.

    You’re drinking the Kool-Aid, Mike.

    With the uptick rule it will be impossible to jam a company down with 65% of the shares traded as short shares in one day like we saw in the major banks. The uptick rule will not prevent the shorts moving the market but it will slow everything down so that well funded traders cannot jam a stock.

    You’ve seen what my little old self can do to a market now imagine what I would do if I had 25M to trade with and I hated a company?

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  • Posted: 26 March 2009 07:16 AM #3

    Seems to me this is intimately tied up with the options market makers right to naked short, which still stands. A large and liquid options market probably cannot exist without the right for MMs to naked short, in which case the Options MM’s are the ones most affected by an uptick rule, always presuming that pre-borrowing is policed for everyone else.

    The options market may itself be a financial WMD while MM’s can naked short, because MM’s automatic hedging as a stock price moves is capable of destabilising the market, and has surely been used by those wanting to trigger naked shorting at no risk to themselves (by buying large quantities of cheap puts before initiating (legal) short selling of their own.

    (I don’t know enough to make any further posts on this topic, so that’s my lot!)

    [ Edited: 26 March 2009 11:31 AM by sleepytoo ]      
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    Posted: 26 March 2009 11:15 AM #4

    Eric Landstrom - 25 March 2009 07:37 PM
    Mayor Quimby - 25 March 2009 07:21 PM

    Reinstating the uptick rule will do nothing now that stocks trade in pennies or fractions of pennies.  You’d have to create a new rule requiring a sustained move (define that) in one direction before allowing a short position to be taken.  But we tried banning shorting as well so that won’t work either.

    You’re drinking the Kool-Aid, Mike.

    With the uptick rule it will be impossible to jam a company down with 65% of the shares traded as short shares in one day like we saw in the major banks. The uptick rule will not prevent the shorts moving the market but it will slow everything down so that well funded traders cannot jam a stock.

    You’ve seen what my little old self can do to a market now imagine what I would do if I had 25M to trade with and I hated a company?

    Not gonna work that way Eric (what Kool-Aid? lol).  I’m a Hedge Fund.  I wait for a .01 cent move (all computerized) up and short the crap out of a stock.  Done.  Or you bid it up a penny and then short.  I know a guy who does the computer programming for major scatter trades for a huge hedge fund.  He will tell you outright - this won’t do a thing.  How does an uptick rule change have anything to do with the % of shares traded that are short?  They can still short.  If you want to prevent shorting, you’re better off limiting the number or % of a stock an institution can BORROW to short.

    If it were that simple, how do you explain October - after shorting was banned in financials?  This won’t do a blessed thing.

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    Posted: 26 March 2009 02:23 PM #5

    Mayor Quimby - 26 March 2009 02:15 PM
    Eric Landstrom - 25 March 2009 07:37 PM
    Mayor Quimby - 25 March 2009 07:21 PM

    Reinstating the uptick rule will do nothing now that stocks trade in pennies or fractions of pennies.  You’d have to create a new rule requiring a sustained move (define that) in one direction before allowing a short position to be taken.  But we tried banning shorting as well so that won’t work either.

    You’re drinking the Kool-Aid, Mike.

    With the uptick rule it will be impossible to jam a company down with 65% of the shares traded as short shares in one day like we saw in the major banks. The uptick rule will not prevent the shorts moving the market but it will slow everything down so that well funded traders cannot jam a stock.

    You’ve seen what my little old self can do to a market now imagine what I would do if I had 25M to trade with and I hated a company?

    Not gonna work that way Eric (what Kool-Aid? lol).  I’m a Hedge Fund.  I wait for a .01 cent move (all computerized) up and short the crap out of a stock.  Done.  Or you bid it up a penny and then short.  I know a guy who does the computer programming for major scatter trades for a huge hedge fund.  He will tell you outright - this won’t do a thing.  How does an uptick rule change have anything to do with the % of shares traded that are short?  They can still short.  If you want to prevent shorting, you’re better off limiting the number or % of a stock an institution can BORROW to short.

    If it were that simple, how do you explain October - after shorting was banned in financials?  This won’t do a blessed thing.

    Okay: you’re a hedge fund. But fully one third of all volume is retail. I rest my case.

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    Black Swan Counter: 9 (Banks need money, Jobs needs a break, Geithner has no plan, Cuomo’s grandstanding, .Gov needs a hobby, GS works for money, flash crash, is that bubbling crude?).

    For those who look, a flash allows one to see farther.

         
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    Posted: 27 March 2009 12:12 PM #6

    October.  I rest my case.

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    Posted: 27 March 2009 12:19 PM #7

    Mayor Quimby - 27 March 2009 03:12 PM

    October.  I rest my case.

    Octclobber?

    Why that has been my call for a bottom.

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    Black Swan Counter: 9 (Banks need money, Jobs needs a break, Geithner has no plan, Cuomo’s grandstanding, .Gov needs a hobby, GS works for money, flash crash, is that bubbling crude?).

    For those who look, a flash allows one to see farther.

         
  • Posted: 28 March 2009 03:00 AM #8

    Reinstating the uptick rule will do nothing now that stocks trade in pennies or fractions of pennies.  You?d have to create a new rule requiring a sustained move (define that) in one direction before allowing a short position to be taken.  But we tried banning shorting as well so that won?t work either.

    The uptick rule will be their death knell for the ultra short ETF’s such as the 2X SKF because there will be no way ETFs will function if it they have to wait for an uptick in each of the underlying stocks (The SKF uses put options).

    I read that in some cases the proposal is to have a scaled uptick, so for example a $300 stock like google, the uptick could be as much as 10cents, and a $100 Stock it might be 5 cents.