The “uptick rule” was put in place to regulate the in 1937. It was removed in 2007. I still think that the Federal Reserve is the biggest problem we have on Wall Street, but re-establishment of the uptick rule could probably solve a lot of the financial problems that we’ve been having lately. MarketWatch.com says:
The uptick rule, which was removed in 2007 after 70 years, allowed short sales only if the preceding sale boosted a company’s stock price by at least a penny. The uptick rule was designed to make sure short sellers couldn’t dominate trading in a stock to drive its price lower.Short sales allow investors to bet that a share price will go down, by borrowing and selling shares of a company in hopes of buying back the shares at a lower price. The original owner then gets the shares back, and the short-seller pockets the difference in the price as profit.Short-selling is controversial. Many companies say short sellers spread false rumors to drive prices lower, but short sellers say they provide the necessary counterweight to the boosterism of market bulls.Some critics say the elimination of the uptick rule was a major factor in the bear market that has seen major stock averages fall 48% since peaking in October 2007, just three months after the rule was abolished. In October 2008, the SEC barred short sales of many financial corporations.