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Spain's stock market extends short selling ban

A homeless man sits near a Caja Madrid bank office in Madrid, Tuesday Oct. 30, 2012. Spain's National Statistics Institute says Tuesday that the country's economy contracted 0.3 percent in the third quarter from the previous three month period. Spain is in a double-dip recession and has a 25 percent unemployment rate. Prime Minister Mariano Rajoy said Monday the country has no immediate need to ask for outside aid to help deal with its debts. (AP Photo/Daniel Ochoa de Olza)

MADRID (AP) -- Spain's financial regulator has extended for three months a ban on short selling of stocks that aims to decrease volatility in markets.

The CNMV regulator says in a statement Thursday that "due to the existence of exceptional circumstances" it is going "to impose, effective immediately and for a period of 3 months, restrictions on short selling and similar transactions."

It first adopted the ban in July.

In a short sale, investors sell stock they do not own, betting that they can buy it back at a lower price. The investor seeks a profit by betting that the price of certain shares will fall.

Short selling of shares has been blamed for worsening market volatility during the financial crisis. Italy also banned short selling in July.