Washington: The Securities and Exchange Commission is considering several approaches to reining in rushes of short selling that can cause dramatic plunges in stock prices, people familiar with the matter said on Friday.

The SEC commissioners are scheduled to vote at a meeting on Wednesday to propose new short-selling rules, and they may put forward two or more separate proposals for public comment.

SEC chairman Mary Schapiro has said the agency will open for comment a proposal to reinstate the so-called uptick rule or take other measures designed to stem market dislocation caused by short selling. The agency could settle on one plan and formally approve it sometime after the comment period.

The uptick rule, which the SEC abolished in 2007, requires short sellers -those who try to profit from a stock's decline by selling borrowed shares - to wait to sell until a stock trades at a price at least slightly above its previous trading price.

The rule served as a sort of blinking yellow light for short sellers, who bet against a stock.

As the market has plunged, pressure has been building from investors and Congress for the SEC to reinstate the uptick rule, which was established in 1938 during the Depression that followed the 1929 market crash.

Those pushing for its restoration say the absence of the rule has fanned volatility in the market, prompting bands of hedge funds and other investors to target weak companies with an avalanche of short-selling.

Six senators, led by Senator Ted Kaufman and Senator Johnny Isakson, told Schapiro in a letter last week that if the SEC "fails to signal clear action" at Wednesday's meeting, "then Congress should do so itself." In the House of Representatives, Gary Ackerman proposed legislation that would order the SEC to restore the uptick rule.

Short-sellers bet against a stock. The practice, which is legal and widely used on Wall Street, involves borrowing a company's shares, selling them, and then buying them when the stock falls and returning them to the lender. The short-seller pockets the difference in price.

The SEC deliberations are in flux and the shape of proposals could change before the public meeting this week. Some of the approaches being considered would go further in limiting short selling than a proposal made last week by four US stock exchanges.

SEC spokesmen didn't immediately return calls seeking comment Friday.

The chief executives of the two biggest US exchanges, NYSE Euronext and Nasdaq OMX Group, and two smaller exchanges, proposed a new rule that would force short sellers to sell shares above the going market rate - which could slow a sharp decline in a stock.

They recommended the rule only go into effect after a stock price has experienced a sharp decline by a certain percentage, possibly 10 per cent.

That's a sort of circuit breaker, which would apply to individual stock prices the way exchanges have mandatory pauses in trading when the value of the whole market drops a certain amount in one day.