The paragraph in Merriam-Webster explaining this usage was rather strangely written:
Upticks are most important when it comes to short-selling stocks. The “uptick rule,” which was in place from 1938-2007, required every short-sale transaction be entered on an uptick. This rule was instated to keep short sellers from putting unjust pressure on a stock’s price, adding to a security’s downward spiral.
To me the whole thing reads like it was written by someone whose first language is not English. The words or phrases “most”, “be entered on”, “instated”, and “unjust” are not the ones that a reasonable writer would have chosen, IMO, and the second sentence is unnecessarily cryptic (mainly due to the odd phrase “be entered on”). The “uptick rule”, quite simply, prohibits a broker from making a short sale at less than the last trade price. He must only make a short sale either at (a) the same price as the last trade, if that price was an uptick, or (b) a higher price than the last trade. This is to prevent short selling from forcing a stock price downward and destabilizing the market.