NYSE head favors 'uptick rule' on short sales

By Jonathan Spicer

NEW YORK (Reuters) - The head of the New York Stock Exchange said on Wednesday he is confident U.S. regulators will extend the ban on short selling some financial stocks and suggested reinstating the "uptick rule" that was eliminated last year.

"It's the solution that we think is easiest to do and easiest to understand," NYSE Euronext Chief Executive Duncan Niederauer, on a conference call, said of the uptick rule, which for decades was used to regulate short selling.

NYSE is in "pretty regular communication" with the U.S. Securities and Exchange Commission, which is considering reinstating the uptick rule, Niederauer said.

"It is back on the table," he added.

The SEC joined regulators in others countries earlier this month in banning short selling in hundreds of financial stocks in an effort to protect companies said to be targeted amid the credit-market turmoil.

The temporary measure is set to expire on Thursday. Niederauer said he is "fairly confident it will be extended for a short period of time."

Short selling is a trading strategy in which stock is borrowed and sold in the hope its value will drop. It is then repurchased at a lower price and returned to the lender.

The SEC adopted the uptick rule -- also called the "plus tick rule" -- in 1938 to help stave off a depression-era market breakdown. The rule forces short sellers to sell at a price higher than the previous trade.