Ban on short selling amid global bank misconduct [REWIND 2023]

Korea’s financial regulators reinstated a full ban on short selling of all stocks from November after global investment banks were found to have committed illegal short selling in the country.

Electronic display boards at the Korea Exchange in wetsern Seoul show Kospi and Kosdaq on Nov. 6, the first day after the financial regulators reinstated the ban on short selling of stocks. [NEWS1]

Korea’s financial regulators reinstated a full ban on short selling of all stocks from November after global investment banks were found to have committed illegal short selling in the country.

The ban, which will be in place through June next year, was the fourth of its kind after the 2008 financial crisis, the 2011 European debt crisis and the Covid-19 outbreak in 2020. The authorities had partially lifted the ban on large-cap stocks from the Kospi 200 and Kosdaq 150 before the latest ban.

The Financial Supervisory Service (FSS) said it will bring up measures to prevent illegal short selling and level the playing field between retail investors and foreign and institutional investors.

The Financial Services Commission said last month that it will ease trading conditions for retail short sellers and make such trades more challenging for institutional investors. The measures included the restriction of institutional investors’ holding period for short-sold stocks from an unlimited length to 90 days, which can be extended following a regulatory report to the FSS.

Critics of the latest ban argued the intention behind the restriction was to soothe retail investors, who have pointed out short selling as a primary reason for Korea’s weak stock market, ahead of the country’s general election scheduled for April next year.

BY JIN MIN-JI [jin.minji@joongang.co.kr]