Question: What will happen if the uptick rule is reinstated?

December 10th, 2008

I received this question last night from a reader (submit your own if you’d like):

What will happen if/when the uptick rule is reinstated?

I don’t think much of anything will happen. Anybody that’s seriously trying to place blame on the recent market collapse on the uptick rule is just not being honest and are looking for a scape goat.

Let’s assume for the sake of argument that the absence of the uptick rule causing prices to go down more severely. Even if it does there’s very little chance that not having the rule in place will keep a stock’s price down. Even if you’re a long term investor this probably opens up more buying opportunities for you because stocks with solid long term fundamentals will be beaten down to prices that make them attractive in the long term.

So, even if I was a long term investor AND I believed the uptick rule works as intended (neither of which is true), I’d still welcome it and view it as an opportunity.

Here’s Mark Cuban’s take on the uptick rule (he’s against it) and here’s Charles Schwab’s take on it (he’s for it).

What are your thoughts on the rule?

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