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The head of the SEC, Mary Schapiro, said that next week the SEC will propose a reinstatement of the “uptick” rule.

The uptick rule was eliminated by the SEC in 2007. It required short sellers to sell their shares at a price above a stock’s most recent trading price.

When someone short sells a stock, they are borrowing a company’s shares, selling them, and buying them when the stock falls. They then give the stock back to the lender while keeping the price difference.

If a company stock was trading at $50 and a trader anticipated that it would decline, he could borrow shares but couldn’t sell them until after the stock traded higher, or “ticked up,” to at least $50.01.

Schapiro said that many investors who include both individuals and large financial institutions are behind a measure to reinstate the rule.

Jeremy

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