After many attempts I finally got an email from the SEC...
If anyone here would like to express a brief statement to the SEC please send me an email to digger@va.net or send me a PM, and I will forward OUR comments to Mr. Green. The topic is the uptick rule. I will summarize each comment and post my email to him as a formal response from SI and the Naked Short thread...if you would like to post what you send me fine, just PM only what you would like forwarded.....
Thank you for contacting the SEC concerning last year's elimination of the uptick rule. I apologize for the delay in responding.
We appreciate the opportunity to shed some light on the rule's operation, the studies that supported its elimination, the effects of the change, and the relevance to current market conditions.
The Commission's decision to eliminate the uptick rule was taken only after an extensive real-world analysis of the impacts and shortcomings of then-existing short sale regulation. Prior to decimalization, the uptick rule (which required either a "tick" or "bid" test, collectively known as "price tests," prior to selling short) did not significantly impede short selling, even when prices were declining. Since the equity markets began quoting prices in pennies in 2001, a short seller needed to wait only until an investor bought at a penny above the last trade or bid quote to sell short. Thus, by 2007, a tick test seemed to have little impact on short selling.
The Commission's Office of Economic Analysis (OEA) studied the impact of the tick test by analyzing real securities, trading on live stock exchanges. Using one-third of the stocks in the Russell 3000 index, OEA created two groups of comparable securities, including both listed and Nasdaq securities. The control group was subject to tick tests or bid tests, while the other group of stocks was not. The OEA study, available at sec.gov, found that the elimination of the uptick rule increased the volume of short-selling, but did not increase overall short interest in a security.
Many investors have called for the reinstatement of the uptick rule as a way to prevent manipulative short selling. As described above, the elimination of the uptick test was based on a real-world analysis of its impacts and shortcomings that found that the tick test had little impact on short selling. The Commission and its staff share your view that bear raids and other manipulative conduct in our markets must be addressed with the full force of the law. We continue to investigate cases of manipulation in which short selling may play a role, and ask that you alert us to any evidence of manipulative conduct.
Once again, thank you for providing us with your comments.
Sincerely,
ROBERT T GREENE
Office of Investor Education and Advocacy
U.S. Securities and Exchange Commission |
