Aug. 19 (Bloomberg) -- U.S. Securities and Exchange Commission Chairman Christopher Cox said his agency will propose new rules aimed at curtailing manipulative short sales of stocks in the ``next few weeks.''

``Our proposals will be designed to ensure the smooth functioning of markets and to support equally the important role of bets on the upside and the downside,'' Cox told reporters in Washington today.

The SEC imposed a temporary measure last month that made it harder for traders to bet on declines in shares of Freddie Mac, Fannie Mae and 17 brokerages. The agency said the order was meant to prevent traders from driving down stocks considered at risk of manipulation after Bear Stearns Cos. and IndyMac Bancorp Inc. collapsed amid speculation they were faltering.

The measure, which expired Aug. 12, targeted so-called naked-short selling by requiring traders to actually arrange to borrow stock before executing a short sale. Prior to the SEC's order, investors were only required to locate shares in advance.

``We are looking to see what were the consequences of doing that,'' Cox said in a Bloomberg Television interview. The agency is also considering rules that would curtail short selling in all companies, not just a select few, he said.

To contact the reporter on this story: Jesse Westbrook in Washington at jwestbrook1@bloomberg.net.

Last Updated: August 19, 2008 15:43 EDT