WASHINGTON -- The Securities and Exchange Commission's new rule designed to limit certain negative stock bets is set to start Monday. Already, a political backlash is brewing.

Last Tuesday, the SEC said it would tighten short-selling rules for 19 financial firms, including mortgage titans Fannie Mae and Freddie Mac, by requiring traders to "pre-borrow" stock before initiating a so-called short sale. The SEC said it had concluded "there now exists a substantial threat of sudden and excessive fluctuations of securities prices...