Apart from the usual suspects — many of the bobblehead persuasion, others of the older-than-dirt Broad-and-Wall “I remember when pillaging customers was in the job description” club — some otherwise intelligent people — looking at you, Nancy Havens — are piling on the “Bring back the up-tick rule” bandwagon. Their case boils down to “It worked for 69 years” before its elimination in Jul. 2007, and that its return would prevent short-sellers piling on declining stocks. Three things:
For most of the rule’s existence, stocks traded in eighths, with helpful specialists standing between buyers and sellers along the way. Ticks — at 12.5 cents apiece, and effectively 25 cents once the highwaymen had taken their cut — were meaningful. At a penny a piece, electronically traded and $8 all-you-can-eat commissions, they’re not.
The coincidence of the rule’s elimination with the discovery that investment banks specifically, a large insurance company especially, and banks generally were hiding massive turds under the wet newspaper of totally made-up valuations has nothing to do with causality.
- Today’s market provides many more ways to implement a negative view on listed equities apart from the relatively blunt instrument of shorting stock. Even when regulators decide the solution to alleged problems created largely by failing to enforce existing regulations is more, hastily enacted, incompetently-drawn, regulations.
And those are just the easy ones. The truckload of research conducted before, during and since the implementation of Reg SHO has come up with not one skerrick of evidence that the up-tick rule was anything but an amusing artifact of an earlier age, and the idea that it prevented bear-raids mere romantic delusion.
So knock it off.