The Australian Shareholders' Association says it supports the introduction of a temporary ban on so-called "naked" short-selling of shares.
The Australian Securities and Investments Commission says it is banned from Monday.
The United States, Britain, Ireland, France and Switzerland have already banned the practice, which involves trading borrowed shares in such a way that the investor makes money when they lose value.
In Switzerland, the bourse and regulators reminded investors that naked short-selling is not allowed on the Zurich-based SWX exchange.
John Curry of the Australian Shareholders' Association says the ban is a wise move, especially in times of global share market volatility.
"Unfortunately we took too long to do it ... We were forced into it really, I guess, by what's been happening overseas.
"I mean there are genuine reasons sometimes where people think that the share price is overvalued and they want to sell at that level and pick up at a lower value.
"But I'm sure that there are rumours in the market place that there are attempts by some short-sellers to, in fact, force the market down."
Federal Minister for Corporate Law Nick Sherry says naked short-selling manipulates the market. "We believe that it has contributed to market volatility," he said.
