2023-10-29 10:05:31
Turning to reexamination of the position that resumption is inevitable
An improvement plan is likely to come out as early as the beginning of the new month.
‘Ant’ demands such as computer systems were also discussed
▲ Previous measures and reasons for the complete ban on short selling, page 17. Attention is being paid to whether the financial authorities will make a sharp turn from a complete resumption of short selling to a complete ban.
An official from the financial authorities said on the 29th, “Not only the opposition party but also the ruling party is raising the issue of short selling. “The authorities’ position has been that the resumption of short selling is inevitable, but now we cannot insist on that position,” he said. As it has recently been revealed that global investment banks (IBs) such as BNP Paribas and HSBC have systematically engaged in illegal short selling in the domestic stock market over a long period of time, it appears that the calls to improve the short selling system can no longer be ignored.
Accordingly, the authorities plan to closely discuss the content, timing, and level of improvement plans, including a complete ban on short selling. It is expected that the direction for improving the short selling system will be released as early as next month. Measures related to short selling must be resolved at a meeting of the Financial Services Commission, which consists of nine members, including the Financial Services Commission Chairman and the Financial Supervisory Service Director. As this is a measure that has a significant impact on the market, meetings and decisions are held without prior notice following the market closes.
The authorities have so far maintained that short selling is a ‘global standard’ rather than an illegal trading technique and that short selling needs to be normalized. Considering the size of Korea’s economy and the level of capital market development, the logic was that it would not be appropriate to ban short selling only in Korea.
However, it is assessed that the mood of the authorities has changed significantly recently. This is supported by Financial Services Commission Chairman Kim Joo-hyun’s remarks on the National Assembly’s Political Affairs Committee’s comprehensive audit of the Financial Services Commission and the Financial Supervisory Service on the 27th. In response to a question from People Power Party lawmaker Yoon Chang-hyeon, who asked, “Shouldn’t short selling be stopped for regarding six months?” he responded, “After seeing IBs continue to cause problems recently, I came to understand that there are good reasons for individual investors not to trust the stock market. “We will go back to square one and improve the short-selling system with the help of the country’s top experts,” he said, backing away from his previous stance.
As the Financial Services Commission announced that it will reexamine the short-selling system from the beginning, it is expected that there will be wide discussions on the introduction of a short-selling computer system and measures to eliminate discrimination once morest individual investors, which individual investors have continuously requested. The redemption period for short sales for individuals is limited to 90 days, but for institutions and foreigners it is virtually unlimited. The short sale collateral ratio of institutions and foreigners is also lower than that of individuals.
So far, a complete ban on short selling has been implemented three times: in the 2008 global financial crisis, the 2011 European financial crisis, and the 2020 coronavirus crisis. From May 2021, short selling resumed only for stocks included in the KOSPI 200 and KOSDAQ 150.
Reporter Kang Shin
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