Monday, 22 September 2008

Strange Coincidences of Our Time

Uptick rule

From Wikipedia, the free encyclopedia

The Uptick rule is a securities trading rule used to regulate short selling in financial markets. The rule mandates that, subject to certain exceptions, when sold a listed security must either be sold short at a price above the price at which the immediately preceding sale was effected, or at the last sale price if it is higher than the last different price. In 1938, the SEC adopted the uptick rule, more formally known as rule 10a-1, after conducting an inquiry into the effects of concentrated short selling during the market break of 1937.

The SEC eliminated the uptick rule on July 6, 2007.

On July 3, 2008 Wachtell, Lipton, Rosen & Katz, an adviser on mergers and acquisitions, said short-selling was at record levels and asked the SEC to take urgent action and reinstate the 70-year-old uptick rule."

Between Sept 15 and Sept 19, 2008 the stock markets experienced some restlessness.

We here at the Diogenes Club would like to reassure you that there is no evidence that the elimination of the Uptick rule had anything to do with the recent upheavals in the markets, and it would be extremely irresponsible of anyone to suggest otherwise, especially in these times of uncertainty.

It is just another in the list of 'Strange Coincidences of Our Time'.

The fact that on Sept 18, 2008 the UK government imposed a temporary ban on short selling, followed by the US on Sept 19, should not be taken to indicate that there was any such link, and indeed, the fact that it is only a temporary ban presumably means that the ban will soon be lifted.

After all, it has taken us a long time to remove the safeguards that were put in place after the Wall Street Crash, and it would be a pity to panic, and put them all back into place just because the global economy is in the process of collapsing.

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