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Fri Mar 21st 15:46 PM | Rating: 0 0
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Changing of the Short Uptick Rule: Bad Timing for a Bad Idea

If a minor bad news event for a company or the economy generally can drive prices down an outsized percentage because of large hedge funds shortselling without such uptick rule restraint (or naked shorting) and panicking others into believing such news is worse than it is, some people will be and have been driven from the market who will not return (because they are unwilling to take such risks).

Simple economics says lower demand (because of those investors leaving) means lower prices and sustained lower stock valuations. It also means more challenges for companies that need to raise capital, especially smaller ones, and more dilution for shareholders of such companies due to the incremental number of shares that need to be issued at lower prices to raise a given amount of money - if it can be raised at all.

This Wild West environment encouraged by the SEC through its actions (or lack of them) on naked shorting, failures to deliver and the uptick rule is not good for either our markets or our economy.
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