Jim Cramer's Take On The Uptick Rule

Jim Cramer is a strong believer in the SEC reversing its 2007 decision of doing away with the 'uptick' short-selling rule. For some perspective, according to Investopedia.com, the uptick rule was:

"A former rule established by the SEC that requires that every short sale transaction be entered at a price that is higher than the price of the previous trade. This rule was introduced in the Securities Exchange Act of 1934 as Rule 10a-1. The uptick rule prevents short sellers from adding to the downward momentum when the price of an asset is already experiencing sharp declines. The SEC eliminated the rule on July 6, 2007."


Cramer believes that putting the uptick rule back in place would benefit stocks by guarding them against the type of unfair, manipulative activity that quickly drove Bear Sterns (BSC) out of business last week.

" When hedge funds were $500 million they didn't have the power to destroy a stock. When they are $50 Billion they can take down anything, they're bigger than the (marketcap of) stocks. Merrill Lynch (MER) is to avoid (because of the activity that took down Bear Sterns) "
- Jim Cramer, via a 3/21/08 video interview on TheStreet.com (TSCM).


Data Courtesy: Investopedia.com + TheStreet.com.
Full Disclosure: I own shares of TSCM.