Markus Ferber, a senior member of the European Parliament, called on the European Securities and Markets Authority to introduce a pan-EU ban on short-selling.

"ESMA?s mandate is to safeguard market stability and integrity," Ferber said in a letter to ESMA's chair Steven Maijoor.

"Hence, ESMA would be well-advised to make use of its emergency powers and introduce a temporary ban on short selling."

Some European and U.S. policymakers have suggested more radical action such as temporarily closing markets or shortening the trading day to calm nerves. Leading exchanges in Europe and the United States dismissed these options on Tuesday.

To trigger ESMA's emergency market powers, ESMA, the European Commission or the European Systemic Risk Board, would need to conclude there is an emergency.

They would then need an endorsement from EU Council of member states to tap the emergency powers.

ESMA declined to say if it was seeking to use its emergency powers. Market infrastructure like exchanges and clearing houses were holding up well, it said.

The ESRB, an offshoot of the European Central Bank, had no immediate comment.

The European Commission said it was closely monitoring the impact of the epidemic on the real economy and on financial markets.

"We are in close contact with supervisory authorities. We have a full range of tools and rules in place to ensure the resilience of financial market actors," a commission spokesman said.

ESMA could introduce a temporary pan-EU short-selling ban under its emergency powers.

The EU watchdog could not on its own shut down securities markets or shorten the trading day as that would have be done by national watchdogs.

The EU Council could, however, order specific actions that ESMA - or the EU's banking or insurance watchdogs - would then coordinate across the bloc.

So far only four of the 27 EU states, France, Italy, Belgium and Spain, have introduced national curbs on short-selling while other countries in the bloc have held back.

Ferber, a senior German centre-right member of parliament's economic affairs committee, said that potentially, the downward volatility being seen is substantially increased by short-sellers.

"Such a ban should be introduced on a European level and in a coordinated way in order to avoid market fragmentation and regulatory arbitrage," Ferber said.

Earlier this week ESMA lowered the threshold for short-sellers to report their positions to regulators in a bid to give earlier notice, saying it was a preliminary step to possible further action.

By Huw Jones