Tinkering With The Tick
Restoring the uptick rule, if it’s restored as it was, should do little to slow a decline in stocks. After all, it isn’t like it’s a NEW thing. Traders have been dealing with the uptick rule for some 70 years already.
From Bill King, via The Big Picture:
As we have mentioned in the past, and we related to reporter yesterday, any professional trader with a modicum of guile knows how to circumvent the uptick rule.
We have decades of experience in seeing this done. We used to accommodate hedge funds by buying from them on an uptick on a regional and then hitting the bid. The hedgie would provide a generous commission. You can get a counter-party to sell you a stock with a hedging derivative; so you can then pound the stock. You can do an EFP on baskets. You can sell another trader a deep in the money call spread, stamp an exercise notice and pound the stock in concert with the other trader. We witnessed this scheme regularly on the CBOE – about 30 years ago!
So when the financial media or traders appear to talk about how the uptick rule will halt abusive short selling, they really don’t understand the market or the major players. But the uptick rule will impede day traders and fantasy stock traders.
The financial media doesn’t understand the market — and most certainly, those in government do not either.
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