The Nasdaq OMX Group (Nasdaq:NDAQ) today announced that it is leading an effort to introduce a "Modified Uptick Rule," a rule that would modernize and enhance current rules designed to prevent abusive short selling.
In a letter to the Securities and Exchange Commission today, Nasdaq ASDAQ OMX, together with Bats, the National Stock Exchange and Nyse Euronext proposed the new restrictions on short selling as the SEC begins to consider rules to eliminate abusive short selling from the market.
The letter from the exchanges states that "...under our Modified Uptick Rule, short selling can only be initiated at a price above the highest prevailing national bid by posting a quote for a short sale order priced above the national bid. As such, the execution of a short sale would occur only at a higher price than the prevailing market at the time of initiation, and only on a passive basis." The markets went on to state that, "This restriction would greatly assist the prevention of manipulative short selling, which is so harmful to the markets."
Bob Greifeld, Chief Executive Officer of NASDAQ OMX, commented, "Markets have changed greatly since the original Uptick Rule was first implemented in the 1930s and it is important that modern markets have modern regulation. With the last sale price, or tick, of an actively traded stock sometimes changing hundreds of times in a single second, we have long believed the original uptick rule failed to deliver any prohibitive value. This more modern Modified Uptick rule will deliver critical protections from abusive short sellers to our publicly traded companies and their investors."