tick-test rules

Definition

Rules that once governed how and when stock short sales could be made, but are now no longer enforced. The tick-test rules were established by the SEC through Rule 10a-1. There were two components of the tick-test: first, that a short could only be made on a price uptick or second, that a short could be made if there was no change in price assuming the previous trade was an uptick. This rule is no longer in place, as the SEC officially removed Rule 10a-1 on June 6, 2007. The rule was originally intended to prevent investors from causing a stock to plummet when its price was already going downwards.
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