Uptick Rule Petition Tops 5,000 Signatures

This letter to the SEC prepared by Jim Cramer, Eric Oberg, Scott Rothbort and Bill Furber, who are in favor of reinstating the Uptick Rule, has been endorsed by more than 5,000 signatures. The petition is now being sent to the SEC, but you can still give your input directly to the SEC by following this link to Submit Comments

We the undersigned believe in not just free markets, but fair markets. While the practice of short-selling equities can contribute to the market in terms of liquidity and price discovery, if left unchecked the practice can impede capital formation. We believe that a relatively simple check that was in place for nearly seventy years, the "Uptick Rule", helped serve the markets well in balancing various participants' interests. We therefore urge the SEC to reinstate such a price test rule, and specifically would urge a plus tick rule over other alternatives such as a "best bid" or "circuit breaker" test.

When the Uptick Rule was initially implemented in the late 1930's, there was an implicit acknowledgement that companies were not commodities. There was recognition that the capital markets served the broader purpose of capital formation; that companies create products, provide services, employ citizens and pay taxes and thus there was an interest to promote market integrity and protect interstate commerce.

In 1963, the SEC's Special Study reiterated the Uptick Rule as being a simple, but effective, mechanism for balancing the various competing interests: allowing for relatively unrestricted short sales in advancing markets, eliminating short selling as a tool for driving the market down by preventing short sales at successively lower prices, and preventing short sellers from accelerating a declining market by exhausting all available liquidity thus leaving long sellers to sell at successively lower prices.

Indeed in 2007, with their report on the Regulation SHO Pilot Study, the SEC's Office of Economic Analysis made the express point that in the context of a "Tick Test", short sellers were liquidity providers, but without such a price test they could readily become liquidity takers. An Uptick Rule validates short sellers as liquidity providers, thus should help remove stigma with the practice.