May 4, 2009
As an individual investor, some of my strategies involve hedging my long positions very quickly. If the uptick rule is brought back, then this hedging "tool" becomes much less effective.
Furthermore, the notion that the uptick rule is responsible for the stock market's decline is absurd when you consider that we are in the worst financial crisis in recent history. I might also point out that when shorting was declared illegal for financial stocks, that didn't stop them from plummeting.
Bringing back the uptick rule will only eliminate one of my financial freedoms (being able to hedge as easily as going long) and will probably result in a two-tiered market where individuals are shackled by the new rule while bigger players find ways around it (i.e., exemptions or synthetic shorts).
If some form of the uptick rule absolutely must be brought back, then please use it in conjunction with a circuit-breaker. I.e., enforce the uptick rule only after a stock has moved a certain percentage for the day.
Finally, I feel the SEC is actually targeting the wrong rule. If the SEC really wants to discourage the pounding of stocks by short sellers, it should enforce the naked shorting rules that are already on the books. If this was done, then there could no longer be a theoretically infinite supply of stock to sell.