[Anchor]
Financial authorities have decided to extend the ban on short selling until March of next year. Until then, they plan to establish a pre- and post-management system to prevent illegal naked short selling and change the conditions that were disadvantageous to individual investors. This is reporter Park Ji-woon.
[Reporter]
Short selling transactions have been banned since November last year due to the issue of illegal naked short selling. Financial authorities have been pushing for improvements to the short selling system and have announced the final improvement measures agreed upon through consultations with the government and the ruling party.
[Kim Ju-hyun / Financial Services Commission Chairman]
“We expect this to be a significant turning point in fundamentally addressing the issue of illegal short selling and protecting investors.”
In the future, institutional investors, who account for over 92% of domestic short selling transactions, will be required to establish a mandatory balance management system and set internal control standards to prevent errors. The aim is to prevent naked short selling in advance.
The Korea Exchange will establish a central inspection system, NSDS, where institutions will conduct another round of inspections after placing sell orders. As NSDS is scheduled to be established by March next year, the ban on short selling has also been extended until the end of March next year.
Furthermore, the conditions for short selling transactions for individuals and institutions will be aligned to eliminate the so-called ’tilted playing field’. Previously, there were no restrictions on the repayment period for institutional investors who borrowed stocks, but going forward, the repayment period will be limited to 90 days, with a maximum extension of 12 months.
The collateral ratio for margin trading, mainly used by individuals, will be lowered from over 120% in cash to 105%, the same as institutional margin trading. The penalties for illegal short selling will be strengthened.
[Lee Bok-hyun / Financial Supervisory Service Governor]
“In cases where the intent is strong or the illegality is severe, we will punish more severely…”
Fines, which were previously 3-5 times the unfair gains, will now be increased to 4-6 times, and in cases where the unfair gains exceed 50 million won, aggravated imprisonment penalties will be introduced.
This is Yunhap News TV, reporter Park Ji-woon.
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