Under the SEC's uptick rule, speculators are prohibited from taking a short position in stocks that have experienced a decline of at least 10 percent for the day, unless the most recent trade resulted in a decrease in the stock price.

Question

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The SEC's uptick rule, also known as the "alternative uptick rule" or Rule 201, does not prohibit speculators from taking short positions in stocks that have declined by at least 10 percent. Instead, it restricts short selling only when the price of a stock is below its current best bid when the stock has dropped 10 percent or more from the previous day's closing price. The rule is designed to prevent short selling from further driving down the price of a stock that is already experiencing significant declines.

Under the SEC's Uptick Rule, Speculators Are Prohibited from Taking