A Securities and Exchange Commission SEC trading regulation that restricted short sales of stock from being placed on a downtick in the market price of the shares.

Zero Plus Tick

Short sales could only be permitted on upticks last trade higher than the one before or zero-plus ticks last trade is the same as previous, which was an uptick. The regulation was passed in to prevent selling shares short into a declining market; at the time market mechanisms and liquidity couldn't be guaranteed to prevent panic share declines or outright manipulation.

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This regulation was rescinded in July by decree of the SEC; as a result short sales can occur where eligible on any price tick in the market, whether up or down. The short sale rule was also known as the "plus-tick rule", "tick-test rule", or "uptick rule".

The SEC began examining the possibility of eliminating this short-sale rule following the decimalization of the major stock exchanges in the early s.

Because tick changes were shrinking in magnitude following the change away from fractions, and U. The SEC ran a test program of stocks in to see if removing the short-sale rule would have any negative effects. After reviewing the results it was decided that the rule no longer needed to exist.

However, naked shorting - selling shares short that don't exist or can't be verified - is still illegal.

Dictionary Term Of The Day. A measure of what it costs an investment company to operate a mutual fund.

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