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Definition of 'Tick Test Rules'
A now defunct rule that placed restrictions on when a short sale may be executed. Tick test rules dictated that a short sale could be made only in two situations:
1. When the price of the particular stock was higher than the last trade price (an uptick).
2. When there was no change in the last trade price. The previous trade price had to be higher than the trade price that preceded it (a zero uptick or zero plus tick)
Also known as the "short sale rule".
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Investopedia explains 'Tick Test Rules'
This rule was intended to prevent investors from destabilizing a stock's price when it was falling. However, on July 6, 2007, the Securities and Exchange Commission struck Rule 10a-1, the regulation that put the uptick restrictions in place, from the books.
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