Tag Archives: where is the uptick rule

Does The Lack of The Uptick Rule Make It Easier To Take Advantage Of Regular Investors?

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With the computerization of trades, and computer algorithms and code created to make trades on the market automatically, I really think that it’s easier to take advantage of regular investors.

Take Herbalife, for example…  When the famous hedge fund titan David Einhorn just questions some statements in Herbalife’s quarterly report, this served as a sell signal for all of the other shorts out there (including Bill Ackman), and they caused the stock to drop over 15%!  It continued to slide from that point much lower.

With the Uptick Rule, such a quick devaluation of the stock would not have happened so dramatically.  It’s obvious that once Mr. Einhorn expressed his concern, all of the other hedge fund manager flooded the market, with selling moves on that stock, this caused it to drop like a stone on really no news at all.  Oh sure, the hedge fund managers didn’t meet the week before and cook up this plan (or did they?), but once Mr. Einhorm expressed his views, it pretty much served as a massive sell signal to all of the other hedge fund managers out there.

To me, this is kind of a predatory approach to the stock market that many hurts us non-hedge fund individuals.  On the other hand, if the “Uptick Rule” was back in place, it would have dramatically change the outcome of that day.  You see, many of the hedge funds make great profits in volatility!  The Uptick Rule lessened that volatility big time!

There is a movement against the top 1%, but I say they should focus their attention towards the hedge fund companies and managers!  They are one of the largest creators of inequality that I’ve seen lately, especially with the complete computerization of the stock markets…  Let’s focus on the panic creators in society that make wounds deeper than the need to be.  After all,  to attack the top 1% seems harsh… after all, who really wants to protest either Warren Buffett or Bill Gates?

What is the government going to re-enact the “Uptick Rule”?  This is something that is making the rich richer, and the middle and poor classes poorer.  If not the “Uptick Rule”, then how about something to reign in the hedge funds companies, who’s practices seem a bit unethical and counterproductive to the entire purpose of the stock market…

What do you think?  Am I off base or wouldn’t it be nice to make the stock market a fair place again?  A place where you invest in a company because you want to own that company, not take advantage of the regular investors!

MR

Where Is The Uptick Rule?

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I watch the market recover today, enough so that the smaller retail investors (middle class investors) might have believed the market had turned and bought some stock.  Then WHAM, either the whales decided to take profit, or the automated machines (stock terminators? hasta la vista baby) kicked in and the DOW ended up down more than 173 points.

I watched this turn of events and all that I kept wondering is “Where is the Uptick Rule, and why hasn’t it been re-instated yet“?  Ironically, as I thought this question, other older guest investors on CNBC asked the same question about 30 minutes after I wondered it myself that day.  I’ve been complaining about the loss of the uptick rule for quite a while!  I first mentioned it in an article on May 2010 as a small blurb about the Uptick Rule.

So what is the Uptick Rule?  Basically that a given stock has to be bid up a tick before shorting can happen!  Now it won’t stop a stock from going down in value and that wasn’t why it was invented!  It’s main purpose is to slow the decline of the downturn of a stock and to prevent corruption from happening because shorter can not pill on to the stock that’s falling like a rock dropped in a pond.

Oh, I heard the excuse how doing away with the uptick rule would help some Wallstreet folks keep their jobs back in 2008, I think that was a month or so before the market started to crash.  But I have to wonder, what about the small investors like me and the rest of the middle class?  Why doesn’t the government re-instate this rule?  With the machines and the whales playing in the market along with the small-scale investors, we are getting slapped around like rag dolls.  As an analogy, it’s like a 4th grade football team playing against the NFL football players…  Obviously, the 4th graders are always going to get hurt!  Why doesn’t the government wake up and realize this?  At least the Uptick Rule gave the middle class investors a fairer chance against the machines and whales…

If anything, it would give the market a boost of confidence, that the government is not going to take market manipulation!  Whether the effect from the reinstatement of the Uptick Rule is real or not, at least it would show the people who the government isn’t trying to destroy everybody’s wealth.  How can they just sit on their hands and let the boomers go bust?  It’s like kicking an old person if you see one out on the street!

Today left a bad taste in my mouth, as I really wondered if the stock market is corrupt and being manipulated.  What incredible sad it would be if that were true.

So I have to wonder, after so many years of not going far enough, Where is the Uptick Rule?

Thanks for letting me rant,

MR