The City regulator has announced restrictions on short-selling, whereby traders bet on share prices falling, in a bid to tackle market instability.
The Financial Services Authority (FSA) is clamping down on the practice that some believe contributed to the Britain's Lloyds Bank Seals Giant Merger ...
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Some analysts have argued that short-selling had been a factor behind the Ј12.2bn takeover of HBOS by Lloyds TSB.
The changes will be introduced from midnight on Thursday.
"While we still regard short-selling as a legitimate investment technique in normal market conditions, the current extreme circumstances have given rise to disorderly markets," said FSA chief executive Hector Sants.
Short-selling is a technique that sees investors borrow an asset, such as shares, currencies or oil contracts, from another investor and then sell that asset in the relevant market hoping the price will fall.
The aim is to buy back the asset at a lower price and return it to its owner, pocketing the difference.
Anyone can short a position in a company's shares, but typically hedge funds are the main players.
The US financial regulator, the Securities and Exchange Commission (SEC), also announced restrictions on short-selling on Wednesday.
Chancellor Alistair Darling welcomed the move by the FSA.
"I have discussed this with the FSA and welcome their decisive action on short selling," Mr Darling.
"I believe it is the right things to do in the current market conditions and in the interests of financial stability," he said.
(BBC)
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