What is the Uptick Rule?
Definition of Uptick Rule: This rule says that a small seller may only start a short selling position after uptick in market for security. It refers to the encouraging movement in the cost of a security, currency or commodity and is regarded as term that specifically notes the times when the new cost quote crosses the preceding quotation in market. This is referred as the contradictory of the downtick. Another term associated with uptick rule is “zero plus tick” taking place when the final trade is same as the earlier one but if the earlier trade was regarded as uptick. These expressions are commonly used when it is employed by this rule. It was used in 1938 to limit the ability of the short sellers to create further down momentum when the cost of the stock starts falling. When the markets moved to the decimalization in 2000, the SEC eliminated this rule in 2007. Because of the abuses followed, Congress made a request that a rule should be reinstated. After evaluating several proposals and after a trial period, SEC made an announcement about the new laws in February. This rule is known as plus tick rule and short sale rule.