Definition
The uptick rule (now Alternative Uptick Rule) restricts short selling when a stock has dropped significantly. The current version triggers when a stock falls 10% from prior close, then only allows short sales at prices above the best bid. It aims to prevent aggressive short selling from accelerating declines.
Example
Stock drops 12% from yesterday's close. The uptick rule activates, preventing short sales below the current best bid price.
FAQ
What is Uptick Rule?
A restriction allowing short sales only after a price increase.
Why is Uptick Rule important?
Uptick Rule helps investors evaluate trading mechanics and make more informed decisions.
Related Terms
Short Selling
Selling borrowed shares with the intention of buying them back at a lower price.
Circuit Breaker
Automatic trading halts triggered by severe market declines to prevent panic selling.
SEC (Securities and Exchange Commission)
The U.S. federal agency responsible for regulating securities markets and protecting investors.