# Short Sales

Hi, Can someone explain the meaning of this sentence to me?It pertains to the conditions for Short Selling. (LOS 52) “Zero ticks, where there is no price change, keep the sign change of the previous order.”

what i understand is that you can only short in “UPMARKET” , i.e if the price is greater then last price… else otherwise you do not trade(short sell stock). Zero tick means there is no price movement in stock. “keep the sign change of the previous order”, i think ithis refers to margin call calculation

You understand correctly, but the up-tick rule was eliminated a few years back. Keeping the sign change refers to the positive (up) and negative (down) sign of the last trade, and with a zero tick (flat) the sign of the trade is given the same as the most recent trade before it due to the fact that zero is obviously neither a positive or negative number.

Ex. 1: trade 1 = \$50, trade 2 = \$50.10, trade 3 = \$50.10. Trade 2 was an uptick (+) from 50 --> 50.10, while trade 3 is a 0+ tick since it traded at the same price as trade 2. Ex. 2: trade 1 = \$50, trade 2 = \$49.90, trade 3 = \$49.90. Trade 2 was a downtick (-) from 50 --> 49.90, while trade 3 is a 0- tick since it traded at the same price as trade 2.

farley, i think this is the first time you being sensile… still i do not understand “keep the sign change of the previous order”… why and also your example does not demonstrates that

It used to be more relevant when there was an uptick rule. You could short on a + or a 0+ tick, but you couldn’t short on a - or 0- tick. Also, NYSE specialists are not allowed to sell long or sell short on - ticks, but they are allowed to sell long (liquidate long positions) on 0- ticks. They also cannot buy long on a + tick but can buy long or cover short positions on a 0+ tick. Specialists were therefore motivated to “keep the tick” – ie. keep the last tick as a 0- so that they could sell stock or 0+ tick so they could buy or cover.

farley’s example looks good to me. In example 1, trade 3 could be a short sale. In example 2, trade 3 could not be a short sale. Teaching the mechanics of an American law that no longer exists is about as stupid as it gets on this exam. Aren’t there more important uses of time out there?