Of course investors support the return of the uptick rule! Who cares?

Posted Jun 10th 2009 2:00PM by Zac Bissonnette
Filed under: Scandals

The Wall Street Journal headline reports (subscription required) that the SEC is "deluged" with support for the return of the uptick rule. Investors who've watched their portfolios hemorrhage value are quick to blame those mean, nasty hedge fund short seller-types.

I'm going to write something here that probably flies in the face of what most people are thinking but here it is: Who the heck cares what most people think about the uptick rule? Seriously. Of course most investors are going to oppose anything that makes it easier for stock prices to fall but the role of the SEC is to maintain a fair and orderly stock market -- not to appease the short-term oriented desires of people who want to look at their portfolio statements and see black.

Listening to the "concerns" of individual investors on an issue as complex as the uptick rule is like asking a classroom full of high school students whether they want to have homework or automatic A+'s.

Someone has to be the adult and in this case, the SEC needs to look at the impact artificially stringent short selling rules have on market efficiency. If it does that, it will have to conclude that policies that encourage short-selling are good for market efficiency and transparency -- both of which will benefit long-term investors in the long run.

Try this experiment: Name a single major securities fraud that was uncovered by someone other than an insider, a short seller or a financial journalist. Then come back and tell me that short selling isn't a vital part of the marketplace.

Tags: inthenews, sec, Short Selling, ShortSelling, Uptick Rule, UptickRule