Uptick Rule May Come Back: Barney Frank

The argument is that the lack of a rule that required share prices to tick higher before more short sellers could pile in created an environment where shorts could accelerate the failures of a number of companies, especially financial names like Bear Stearns, Lehman Brothers and Washington Mutual.

Other financials, such as Citigroup (C), Bank of America (BAC), AIG (AIG), Goldman Sachs (GS) and Morgan Stanley (MS), have also seen their share prices driven down dramatically, with many attributing the moves lower to short sellers benefiting from the suspension of the uptick rule.

The financial sector responded positively to word of a reinstatement of the uptick rule as well as word that Citigroup has been profitable through the first two months of the year.

Shares of Citigroup surged 38.1% Tuesday, Bank of America jumped 27.7%, AIG rose 20% and Goldman Sachs gained 15.3%.

Many market participants argue that a reinstitution of the uptick rule would be a major positive catalyst for the stock market. The market welcomed Frank's comments with a 300-point rally on the Dow Jones Industrial Average. However, some have argued that the uptick rule is not a panacea.

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