More companies added to short-sale protection list

NEW YORK -- The Securities and Exchange Commission hopes to prevent a run on financial-services companies by temporarily limiting the ability of traders to bet that their shares will decline. Short sellers borrow and sell stock held by other people; they profit when they can repurchase the shares later at a lower price before returning them to the owner.

In a press release on Friday, the SEC said that "unbridled short selling is contributing to the recent, sudden price declines" in financial institutions' shares. It added that they are "particularly vulnerable to this crisis of confidence and panic selling."

The SEC halted short-selling in designated firms through Oct. 2. The restriction could be extended for a total of up to 30 days.

It also told the New York Stock Exchange and Nasdaq Stock Market that they could include other companies. "We're not trying to maintain a master list," says SEC spokesman John Heine.

That led to a flurry of activity over the weekend.

Short sellers say that the SEC acted too hastily, as evidenced by the changes on the protected list.