ASIC will ban naked short-selling from today and will require investors to provide better disclosure on regular short-sales.
The practice of so-called "naked" short-selling will be temporarily banned until further notice, ASIC announced late on Friday.
The effects of the ban will commence from the open of trading today and follows actions taken by United Kingdom and United States regulators to crack down on short-selling last week.
Naked short-selling is short-selling stocks without actually borrowing them first, unlike in normal short-selling.
ASIC will also introduce new reporting requirements for covered short-sales through the Australian Securities Exchange (ASX).
"Use of short-selling to manipulate the market or to take advantage of the situation currently confronting global financial markets is of significant concern," Minister for Superannuation and Corporate Law Nick Sherry said in a statement.
"As previously announced, the government will be introducing legislation to strengthen disclosure of covered short-selling into the Parliament very shortly.
"[Last Friday's] actions reflect the circumstances arising over the last week in global securities markets and lock in with actions taken in London and Washington."
The UK Financial Services Authority banned short-selling of financial shares for the rest of the year, according to a statement on the regulator's webpage.
The US Securities and Exchange Commission may also soon implement measures to make hedge funds disclose their short positions, according to media reports last week.
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