Canada's largest securities regulator has joined an international stampede to curb short selling that has been blamed in part for precipitous declines in the share prices of financial services companies during the 14-month global credit crisis.

Late Friday, the Ontario Securities Commission issued an order prohibiting short selling in the stocks of financial services companies including Canada's Big Five banks and major insurance companies.

David Wilson, chairman of the OSC, said the commission wanted to ensure that Canadian markets would not be used for "regulatory arbitrage." All but one of the 13 affected companies also have a listing in the U.S.

Earlier Friday, the U.S. Securities and Exchange Commission temporarily banned short selling in 799 stocks, a day after the United Kingdom's regulatory authority temporarily halted short selling in certain stocks.

The SEC had been the subject of harsh criticism from New York State Attorney General Andrew Cuomo and presidential candidate John McCain for refraining from taking the strong action earlier.

The regulatory crackdown will also force hedge funds to reveal their short positions.

Share prices staged a rally Friday amid the clamp down on short selling, and as the U.S. government stepped in with a pledge to take control of "toxic" loans tied to troubled mortgages and other debt.

The OSC's order, which will be in effect until at least Oct. 3, involves the following stocks: Aberdeen Asia-Pacific Income Investment Company Ltd., Bank of Montreal, The Bank of Nova Scotia, Canadian Imperial Bank of Commerce, Fairfax Financial Holdings Limited, Kingsway Financial Services Inc., Manulife Financial Corporation, Quest Capital Corp., Royal Bank of Canada, Sun Life Financial Inc., Thomas Weisel Partners Group Inc., The Toronto-Dominion Bank, and Merrill Lynch & Co. Canada Ltd.

"This order is being issued as a precautionary matter with respect to short selling of the securities of financial sector issuers subject to the U.S. Securities and Exchange Commission (SEC) short selling order," Ontario's financial regulator said in a statement.

The OSC took the action in its capacity as lead regulator of the TSX stock exchange.

Mr. Wilson said trading in other financial services stocks will be monitored and the OSC will "take action if necessary."

Dwight Duncan, Ontario's minister of finance, said his ministry is working with the securities commission and is confident the financial markets are "strong and well positioned" to withstand the current economic challenges.

"These [short selling] measures are aimed at protecting Ontario and Canadian investors," he said.