Message 25238367
Uptick Rule Revival May Fail to Lift Stocks & Curb Volatility
By Edgar Ortega and Jesse Westbrook
Dec. 9 (Bloomberg) -- Resurrecting the “uptick rule,” the 70-year-old restriction on short sellers, would probably fail to curb bets against equities or damp price swings, according to brokers that trade about 25 percent of U.S. stocks.
Members of Congress, T. Rowe Price Group Inc. and the head of NYSE Euronext blame the Securities and Exchange Commission’s 2007 decision to eliminate the regulation for contributing to the worst year for stocks since 1931. New York-based Morgan Stanley, Citigroup Inc. and Lehman Brothers Holdings Inc. blamed short sellers, who profit from declining stock prices, for spreading rumors that drove their shares to their lowest this decade.
Executives at UBS AG, Deutsche Bank AG and Knight Capital Group Inc. say bringing back the rule, which prevented traders from making bets against stocks when they were falling, is unlikely to reduce volatility. Ever since computers started trading millions of shares in seconds and exchanges began quoting stocks in penny increments in 2000, the regulation has become obsolete, they said.
“It was a good rule back when trading was manual, but now that trading is much more automated, I don’t see it as a viable solution,” said C. Thomas Richardson, global head of transaction services for New York-based brokerage Nyfix Inc.
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