The search for scapegoats is widening. Please consider a letter written to Jim Sinclair by Duncan Niederauer, Chief Executive Officer, NYSE Euronext.

Duncan’s letter was posted in the article Developments On The Restoration Of The Uptick Rule.

Dear James:

Last fall we promised to keep you apprised of any developments on short selling or the uptick rule. As you know, I have been a big proponent of reinstating the uptick rule and from the survey we did last fall, the vast majority of you agree with me. We are the only U.S. exchange to support this position from day one. It seems that we are finally gaining some traction with regulators and there is now some political momentum to make a change, and I am hopeful that the other trading venues in the U.S. will finally support such a change.

Barney Frank, who chairs the U.S. House of Representatives Financial Services Committee, said earlier this week that he hopes the uptick rule will be reinstated within the next month and I was in Washington yesterday speaking with top officials at the SEC about this very thing.

I am not sure if the rule will be reinstated in its original form, but I do see us working with other equity markets and regulators in the near future to come up with a few new ideas for the best way in which some form of the “tick test” could be reintroduced. This could involve a price test that takes the greater speed of today’s markets into account or stock-specific rules that would be triggered by trading activity.

No matter what form the rule ultimately takes, change is coming and that should help restore some confidence and stability in the markets. As always, your comments and suggestions are welcome. I will keep you updated as more information is available and we will continue to advance on this and other positions that support your company and shareholder interests.

Nonsensical Proposal

A requirement that only permits stocks to be shorted on upticks makes exactly as much sense as only allowing stocks to be purchased on downticks. In a single word “None”.

Mike “Mish” Shedlock
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