The SEC recently eliminated the 'uptick rule', which was put in place after the Great Crash of 1929 in an effort to prevent bear raids. The rule mandated that stocks could only be shorted on an uptick -- the price of the short-sale had to be higher than the last price.

Some commentators, including Chuck Jaffe, are complaining that the end of the rule has allowed short-sellers to pile into stocks more easily than before. And maybe that's true. They complain that this has increased the volatility of the market, and maybe they're right.

But here's the problem: There's really no particularly intelligent justification for the rule. Short-sellers are already required to go through the cumbersome process of borrowing shares before they short. If we're really concerned about the uptick rule making it too easy to short and drive prices down, shouldn't we also implement a downtick rule? That way it would be harder for pumpers and promoters to drive up the prices of stocks.

Of course we shouldn't do that. That would be insane. But it's really not substantially less crazy than the uptick rule.

We have tons of regulations on short-sellers, and the fewer we have the better it is for America -- effective short-selling keeps things from getting out of hand like they did in the internet bubble. It also provides an incentive for investors to uncover fraud. The market has such a bullish bias, and it's great that people can also make money by looking for signs of trouble. That's what makes a market.