Alcorn State University

The uptick rule is a former rule established by the SEC that required that every short sale transaction be entered at a price that is higher than the price of the previous trade. The purpose of this rule was to prevent short-sellers from adding to the downward momentum of a sharp decline by continually selling short, inducing profits, thus contributing to potential crashes. On June 6, 2007, SEC eliminated the uptick rule after a pilot test on 30 % of Russell 3000 stocks. The purpose of this paper is to determine whether the elimination of uptick rule increased the short-term volatility of the market. Using data from DJIA, S&P 500 index, and 30 Dow companies, it is found that both intraday and inter-day volatility went up in response to the elimination of the rule