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The Securities and Exchange Commission approved the release of five different proposals for reinstating the uptick rule, a provision that would limit short selling.

The uptick rule allows short sales only if the preceding sale raised a stock price by at least a penny. It was designed to make sure short sellers couldn't drive prices lower in a severe downturn. The uptick rule was removed in 2007 after 70 years.

Many companies say short sellers start false rumors to drive prices lower but short sellers say they provide the necessary balance to overrun optimism of market bulls.

Some say the elimination of the uptick rule was a major factor in the bear market that has seen stocks fall 48% since the October 2007 peak.

The five SEC proposals, put out for a 60-day public comment period, were approved unanimously by the five-member panel. The proposals vary from reinstating the old rule to creating a new rule that would only apply in severe market conditions.

1. Simply reinstate the uptick provision removed in 2007. The SEC is also asking the public to comment on four variations.

2. Allow short sales only after a potential buyer bid at least a penny more than the company's stock price. This bid test is different than the original uptick rule because it would allow a short sale after a higher bid rather than a higher sale price. For technological and implementation reasons, the SEC staff indicated that it favored this approach over reinstating the old uptick regulation. 3. 4. 5. Three proposals, known as "circuit breaker tests," would limit short selling for the duration of one trading day once certain triggers were met. One provision would ban short selling outright in a particular security if there were a 10% decline in its stock price, according to the agency. The ban would be in place for the remainder of the day.

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