Wednesday, March 25, 2009

Exchanges Propose Modified Uptick Rule

As reported by Reuters, the New York Stock Exchange, the NASDAQ Stock Market and BATS Exchange have proposed the introduction of a modified uptick rule in a joint letter to the SEC. Under the original uptick rule shorting of securities can only be carried out if the last sale price was higher than the previous price. In contrast, the modified version of the rule advanced by the exchanges would only allow short sales at a price above the highest available bid. "As such, the execution of a short sale would occur only at a higher price than the prevailing market at the time of initiation, and only on a passive basis," the letter said. The letter also calls for the implementation of circuit breakers that would trigger the new uptick rule only after the price of a stock has declined by a certain percentage.

As previously reported, the SEC is meeting on April 8, 2009, to discuss the introduction of new short selling rules.