NEW YORK (MarketWatch) -- When Russia shut down its stock markets to avoid the global collapse sweeping the markets earlier this week, most of Wall Street shook its head.

The move smacked of totalitarianism and artificial manipulation, such a brazen intervention wouldn't happen in a free market.

Well, the Russians are having a good chuckle after Securities and Exchange Commission Chairman Christopher Cox, following the lead of the U.K.'s Financial Services Authority, initiated a ban in short selling for 799 U.S. financial institutions including Morgan Stanley MS, -2.35% , Goldman Sachs Group Inc. GS, -1.14% and Washington Mutual Inc. WM, -0.55% . See full story.

The move smacks of irony on several fronts. For one, institutions such as Morgan and Goldman regularly practice short-selling as part of their proprietary trading strategies. These firms made billions in profits by running hedge funds or serving them through prime brokerage operations. They shrugged when companies complained that short sellers were ruining their companies.

Now, Morgan's John Mack and Lloyd Blankfein of Goldman not only won a ban of naked shorting, but of all shorting of their industry. They also have persuaded New York State Attorney General Andrew Cuomo to investigate short selling in the market place.

Remember, short selling is perfectly legal. Manipulating prices through rumor isn't. But what is the SEC banning?

Eric Newman, portfolio manager at TFS Capital TFSMX, said the SEC is doing exactly what claims to be against -- manipulating the markets and propping up ailing financial companies. They're doing it because the banks are essentially backed by taxpayers and have become politically important.

Our complaint through history about countries that try to influence their markets by changing the rules mid-game was that it was tantamount to cheating. For all of its faults, the U.S. markets were supposed to be the most level playing fields in the world.

At least Russia shut everyone out of the game.

- David Weidner