May 5, 2009
Since the uptick rule was removed by Rule 201 Regulation SHO in 2007, shares of US financial institutions were sold short in heavy turnover (some times by naked shorting) with savage swings downwards. These savage swings often caused longer term investors to lose confidence in the financial bank stocks, causing them to panic and sell as well.
As a result, bank stocks were driven down to price levels where it was not feasible for banks to raise more capital from the private investors, leading to government investment.
The uptick rule should be replaced to hinder these sorts of (panic) raids in the future for the sake of market confidence.