An up-tick rule for everyone

Author: | Published: 17 Nov 2008

The SEC in the US has the ability to revive and modify the up-tick rule. This power should be exercised in order to set an example. A global up-tick rule is a far better way to contribute to financial stability than a ban. In the US there has been call for the reintroduction of the rule and in the UK there has been the suggestion that it be adopted. The current ban on shorting will only have the effect of forcing short sellers to search for similar exposure in non-financial markets, to gain short exposure through the credit-default swap (CDS) market and to create synthetic short positions via spread betting through the use of contracts for difference (CFDs) where physical stock does not have to be delivered. As mutual funds and pension funds cut their stock lending programmes, naked short selling may increasingly be engaged in.

Short selling and market...