What Is the Uptick Rule?
The uptick rule is a U.S. restriction on short sale transactions. The Securities and Exchange Commission (SEC) first adopted it in 1938 as Rule 10a-1 under the Securities Exchange Act of 1934. Its purpose was to keep short sellers from adding downward pressure to a stock that was already falling. A short sale involves borrowing shares, selling them, and hoping to buy them back later at a lower price.
How the Original Rule Worked
Under the original rule, a short sale could be executed only at a price above the most recent different trade price, which is called an uptick. It could also be executed at the same price as the last trade, but only when that trade was itself higher than the trade before it. This second case is called a zero-plus tick. In practice, short sellers had to wait for the price to rise before they could sell borrowed shares.
The SEC eliminated this original rule in 2007 after reviewing its effectiveness.
The Modern Alternative
After the market turmoil of 2008, the SEC adopted a replacement in 2010. It is usually called the alternative uptick rule and appears as Rule 201 of Regulation SHO. The rule is triggered when a stock falls at least 10% from its prior day's closing price. Once triggered, short sales in that stock may be executed only at a price above the national best bid for the rest of that trading day and the following day.
Why It Matters to Investors
Supporters of the rule argue that it limits aggressive "bear raids," in which heavy short selling pushes prices down further. Critics argue that it can slow the flow of information into prices and reduce the liquidity that short sellers provide. Some observers also note that short sellers who are forced to buy back shares can contribute to a short squeeze, and that other tools, such as market-wide trading pauses known as circuit breaker halts, address sharp declines more directly.
The uptick rule applies only to short sales. It does not limit ordinary purchases or sales of stock by investors who own their shares.
Updated October 29, 2026. For general education only; not financial, tax or legal advice.