Charles Schwab says restoring the uptick rule would smooth out markets and reduce the speed of price drops.
The rule, which said that short sales could be made only after the price of a stock had moved up over the prior sale price, was rescinded by the SEC in July, 2007.
"The uptick rule (prevented) short selling from turning into manipulative activity," Schwab wrote in The Wall Street Journal.
"For nearly 70 years average investors benefited immensely from that one simple stabilizing act."
According to Schwab, the average 401(k) retirement account has lost 20 to 30 percent of its value over the last 18 months and more than $2 trillion in retirement savings has been wiped out.
"Behind those numbers are real people who planned and saved, and who are suddenly facing an uncertain retirement and the prospect of working longer," he said.
"The SEC has an opportunity to make a real difference in helping to control future market stability, but has been strangely silent as the crisis has worsened."
When the uptick rule was first in force, stocks changed hands at minimum intervals of 12.5 cents. Today's automated trades happen so fast that they are calculated in tenths of a penny.
"From an operational and technology perspective, (reinstating) it may be a much bigger undertaking than people may think," Leonard Amoruso, general counsel for Knight Capital told Bloomberg.
"This is not just dusting off old software and dropping it back into your servers."
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