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Exploring Zero Plus Tick: A Comprehensive Legal Overview
Definition & Meaning
A zero plus tick is a type of securities transaction that occurs when a stock is traded at the same price as a previous trade, but at a price that is higher than the price of two trades before it. This trading practice is also known as a zero up tick. Historically, the U.S. Securities and Exchange Commission (SEC) implemented an uptick rule that allowed stocks to be shorted only on an uptick or a zero plus tick, prohibiting short sales on a downtick. This rule was removed in 2007, which changed the dynamics of stock trading significantly.
Table of content
Legal Use & context
The term zero plus tick is primarily used in the context of securities trading and regulation. It is relevant in areas such as finance, investment, and securities law. Understanding this term is essential for traders and investors, especially those engaging in short selling. Users can manage related documentation and transactions using legal templates from US Legal Forms, which can help streamline their trading processes.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
Example 1: A stock trades at $50, then at $50 again, and then at $51. The third trade is a zero plus tick because it is higher than the price of the trade two transactions earlier.
Example 2: A trader attempts to short a stock that has just experienced a downtick. Due to the uptick rule, they would need to wait for a zero plus tick or an uptick to proceed with the short sale. (hypothetical example)
Comparison with related terms
Term
Definition
Difference
Uptick
A trade executed at a price higher than the last trade.
Zero plus tick is specifically higher than two trades prior.
Downtick
A trade executed at a price lower than the last trade.
Zero plus tick cannot occur on a downtick.
Common misunderstandings
What to do if this term applies to you
If you are involved in trading and the concept of zero plus tick applies to your transactions, ensure you understand the implications for short selling. Consider using US Legal Forms' templates to help manage your trading documentation. If you find the regulations complex, it may be beneficial to consult with a financial advisor or legal professional.
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A zero plus tick refers specifically to a trade that is at the same price as the last trade but higher than two trades before, while an uptick is simply a trade at a price higher than the last.
Yes, historically, short selling was allowed on zero plus ticks, but regulations may vary, so it's essential to check current rules.
The uptick rule was lifted in 2007, changing how stocks could be shorted.