France, Italy, Spain and Belgium have banned short-selling on the shares of banks and other financial companies.
It follows sharp gains and losses in bank stocks in recent days, especially in France, on fears about their exposure to eurozone government debt.
Societe Generale has been the worst affected by the volatility, being forced on Wednesday to deny that its financial stability was at risk.
Short-selling is when traders profit from bets on the fall in a share price.
It has been blamed for increasing recent market instability.
Short-sellers usually borrow shares or bonds, sell them, then buy them back when the stock falls – pocketing the difference.
"Naked" short-selling is when a trader sells financial instruments he has not yet borrowed.
All forms of short-selling are included in the ban.
The announcement was made both by the European Union's markets supervisor, ESMA, and the four national markets authorities.
France's agency, the AMF, said it was banning short-selling on 11 banking and insurance stocks for 15 days, including France's three largest banks, Societe Generale, BNP Paribas and Credit Agricole.
In Thursday trading on Societe Generale's share price started up 8%, before falling by the same amount, and then recovering to finish 3% higher.
Societe Generale chief executive Frederic Oudea said the speculation about his bank was "absolutely rubbish".
Mr Oudea also spoke to France Info radio. "People are scared," he said, "so the tiniest information touches off irrational fears. To our clients, we have to tell them that these rumours are baseless and that they can have confidence in Societe Generale."
Greece banned short-selling on Monday.
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12 Aug, 2011
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