Uptick rule

The uptick rule stated that the short selling of a security could only occur on an uptick, at a price higher than the price of the immediately preceding trade. The rule was mandated by the Securities and Exchange Commission from 1938 to 2007. The intent behind the rule was to keep short sellers from adding to the downward momentum in the price of a security. The rule has been replaced by an alternative uptick rule that restricts short selling when the price of a stock has already dropped more than 10% in one day as compared to its closing price on the preceding business day.