But the rule's main intent — to help stem quick, steep stock declines that create financial panic — actually kicked in right after the Securities and Exchange Commission announced investor protections on Tuesday night.

Wall Street pros credit the ruling, which makes it harder to engage in a trading technique known as "naked" short selling, with helping fuel a 534-point three-day rally on the Dow Jones industrials and a 21% gain for the S&P 500 financial sector.

The SEC crackdown targets short sellers, who hope to make money by selling borrowed shares and buying them back at lower prices. A naked short sale occurs when the trader does the trade without actually borrowing the shares, which can intensify the downward pressure on a stock.

The SEC order requires short sellers to take possession of the stock. Previously, a short seller could simply ask a broker to locate the shares, which made it easier and faster to profit in a falling market.

"The SEC essentially took much of the gunpowder away from the bears," says Paul Schatz, president of Heritage Capital.

It also likely prompted traders involved in naked short selling to reverse their bets by buying back shares — pushing stocks up sharply in the process — ahead of today's official enforcement of the SEC's order, says Todd Clark, trader at Nollenberger Capital. Falling oil prices and better-than-expected profit news from banks also helped stocks.

The order will be in effect until July 29 and involves 19 financial firms, including Freddie Mac and Fannie Mae. Both stocks came under heavy assault from short sellers early last week after the government said it would backstop the two mortgage giants if necessary. Freddie shares rose 75% in the three days ended Friday, but are still down 86% from their 52-week high. Fannie rebounded 90% but remains 81% off its high within the past year.

The action aims to stop unlawful manipulation through naked short selling," SEC Chairman Christopher Cox said last week.

Since the short-selling rules were announced Tuesday, stocks with the highest short interest have performed the best. Average S&P 1500 stock return ranked by short interest:
Short interest	Gain since Tuesday
Highest	15.4%
2nd highest	10.4%
3rd highest	9.4%
4th highest	7.2%
5th highest	5.0%
5th lowest	6.0%
4th lowest	5.2%
3rd lowest	3.8%
2nd lowest	2.7%
Lowest	2.2%
Source: Bespoke Investment Group