No Uptick Rule: Convenient Scapegoat?

From the “you have only a few more days to kick me around” department: I’ve written here previously about the uptick rule and whether it is the cause of all that ills the financial world, er, the stock market.

I won’t sit here and argue whether it should be reinstated. The markets have clearly become more volatile, and some stocks, like Bear Stearns, have been obliterated.

But is the lack of an uptick rule to blame?

Several points:

1. There don’t appear to be any solid studies on the subject. Barry Ritholtz has a good chart here that shows volatility definitely has increased since the rule was fully eliminated in July of last year. Ironically, he points out, if shorts are fast to cover,the volatility would appear to be very much on the upside.

2. Many people forget that a pilot program on the elimination of the uptick rule went into effect on 1,000 highly liquid stock