WASHINGTON — Federal regulators imposed new curbs Wednesday on short-selling, hoping to prevent spiraling sales sprees in a stock that can stoke market turmoil.
The Securities and Exchange Commission, divided along party lines, voted 3-2 to adopt a new rule. Investors and lawmakers have clamored for brakes on trading moves they say worsened the market’s downturn in the fall of 2008.
The rule puts in a so-called circuit breaker for stock prices, restricting short-selling of a stock that has dropped 10 percent or more for the rest of a trading session and the next one. The new curbs take effect in about 60 days, but stock exchanges have six months after that to implement them.
Short-sellers bet against a stock, a practice widely used on Wall Street. They borrow shares, sell them and buy them when the stock falls and return them to the lender — pocketing the difference in price.
The SEC asked for public comment last April on several alternatives for restraining short-selling, and a bipartisan group of senators has pushed the agency to act or face legislation. The agency got more than 4,300 comments on the issue.
Sens. Ted Kaufman, D-Del., and Johnny Isakson, R-Ga., who head the Senate group, called Wednesday’s action by the SEC “a step forward” but said its effect will be limited.
