SEC Votes to Limit Short Sales

The uptick rule is gone, but it’s bizarre logic will live on:

The rule applies to stocks that decline at least 10% in a single day. For such stocks, the SEC will allow short selling only if the price of the sale is above the highest bid price nationally. In other words, the short seller is blocked from dumping the shares at a cut-rate price.
The curbs will apply for the remainder of the day the stock falls 10% and the following trading day.

On any given day, only about 1.3% of stocks are down 10% or more, but those are the stocks where price discovery is most important. On October 10, 2008, 68% of stocks were down over 10%.

Posted by on February 25th, 2010 at 9:26 am

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