Tick Test Rules

AAA

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".

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.

RELATED TERMS
  1. Short-Interest Theory

    A theory which holds that a security with a high degree of short ...
  2. Short Covering

    Buying back borrowed securities in order to close an open short ...
  3. Short Squeeze

    A situation in which a heavily shorted stock or commodity moves ...
  4. Short Sale

    A market transaction in which an investor sells borrowed securities ...
  5. Short-Sale Rule

    A Securities and Exchange Commission (SEC) trading regulation ...
  6. Uptick Rule

    A former rule established by the SEC that requires that every ...
Related Articles
  1. The Uptick Rule Debate
    Active Trading Fundamentals

    The Uptick Rule Debate

  2. The Uptick Rule: Does It Keep Bear Markets ...
    Active Trading Fundamentals

    The Uptick Rule: Does It Keep Bear Markets ...

  3. Short Selling Tutorial
    Active Trading Fundamentals

    Short Selling Tutorial

  4. Pick the Right Brokerage Account for ...
    Options & Futures

    Pick the Right Brokerage Account for ...

comments powered by Disqus
Hot Definitions
  1. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  2. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  3. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  4. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  5. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  6. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
Trading Center