Uptick Rule
A former rule established by the SEC that requires that every short sale transaction be entered at a price that is higher than the price of the previous trade. This rule was introduced in the Securities Exchange Act of 1934 as Rule 10a-1. The uptick rule prevents short sellers from adding to the downward momentum when the price of an asset is already experiencing sharp declines. The SEC eliminated the rule on July 6, 2007.
The uptick rule was also be known as the "plus tick rule". Investopedia Says:
By entering a short sale order with a price above the current bid, a short seller ensures that his or her order is filled on an uptick. The uptick rule is disregarded when trading some types of financial instruments such as futures, single stock futures, currencies or market ETFs such as the QQQQ or SPDRs. These instruments can be shorted on a downtick because they are highly liquid and have enough buyers willing to enter into a long position, ensuring that the price will rarely be driven to unjustifiably low levels. Related Terms:
Bid
Downtick
Plus Tick
Securities and Exchange Commission - SEC
Securities Exchange Act of 1934
Short Selling
Single Stock Future - SSF
Spiders - SPDRs
Tick-Test Rules
Uptick |