• SK FSC Chairman Kim Joo-hyun held a briefing with SK FSS Chairman Lee Bok-hyun, on the complete ban on short selling of all stocks in the domestic stock market.
• Follows SK FSC, FSS February 2021 further extended short selling ban until May.
• Also follows SK FSS May 2023 issued plan to eradicate illegal short-selling.

Background

• Currently, short selling is prohibited except for stocks included in KOSPI 200/KOSDAQ 150, and leveraged short selling by market makers and liquidity providers is permitted.
• Despite improvements in the system so far, there are still concerns about fair price formation in the market, as investors are found doing illegal naked short selling.
• Recently, a case of large-scale naked short selling by a global investment bank was discovered, along with additional illegal circumstances; an investigation is ongoing.

Measures

• During the period of the ban, regulators will prepare improvement measures to resolve the tilted playing field of short selling conditions, and to prevent naked short selling.
• Consider alternatives to establishing real-time blocking system for naked short selling.
• Investigations to detect and punish naked short selling by foreigners and institutions; apply a zero-tolerance principle, including strict penalties, active criminal prosecution.

Effectiveness

• Effective from 6 November 2023 through the first half of 2024, until end of June 2024.