what is the uptick rule 
the uptick rule also known as the plus tick rule is a rule established by the securities and exchange commission sec that requires short sales to be conducted at a higher price than the previous trade investors engage in short sales when they expect a securities price to fall the tactic involves selling high and buying low while short selling can improve market liquidity and pricing efficiency it can also be used improperly to drive down the price of a security or to accelerate a market decline understanding the uptick rulethe uptick rule prevents sellers from accelerating the downward momentum of a securities price already in sharp decline by entering a short sale order with a price above the current bid a short seller ensures that an order is filled on an uptick the original rule was introduced by the securities exchange act of 1934 as rule 10a 1 and implemented in 1938 the sec eliminated the original rule in 2007 but approved an alternative rule in 2010 the rule requires trading centers to establish and enforce procedures that prevent the execution or display of a prohibited short sale the 2010 alternative uptick rule rule 201 allows investors to exit long positions before short selling occurs the rule is triggered when a stock price falls at least 10 in one day at that point short selling is permitted if the price is above the current best bid 1 this aims to preserve investor confidence and promote market stability during periods of stress and volatility the rule s duration of price test restriction applies the rule for the remainder of the trading day and the following day it generally applies to all equity securities listed on a national securities exchange whether traded via the exchange or over the counter the uptick rule is designed to preserve investor confidence and stabilize the market during periods of stress and volatility such as a market panic that sends prices plummeting exemptions to the rulefor futures there are limited exemptions to the uptick rule these instruments can be shorted on a downtick because they are highly liquid and have enough buyers willing to enter into a long position ensuring that the price will rarely be driven to unjustifiably low levels to qualify for the exemption the futures contract must be deemed to be owned by the seller this means that according to the sec that the person holds a security futures contract to purchase it and has received notice that the position will be physically settled and is irrevocably bound to receive the underlying security 