SEOUL: Financial authorities announced on Sunday that South Korea will reimpose a ban on short-selling shares starting on Monday( Nov. 6 ) at least until June in order to create” level playing fields” for retail and institutional investors.
The restriction was lifted in May 2021 for deals involving stocks of companies with significant market capitalization that were included in the share price power KOSPI200 and KOSDAQ150. The limitation has persisted for the majority of various stocks.
Short-selling is the practice of selling borrowed stocks to repurchase them for a profit.
According to Financial Services Commission ( FSC ) Chairman Kim Joo-hyun, the measure is intended to fundamentally lessen” the tilted playing field” between institutional and retail investors.
Big foreign investment banks have been involved in unfair trades as a matter of practice due to ongoing economic market uncertainty, and we came to the conclusion that it would be impossible to uphold fair trading discipline, according to Kim.
According to him, the FSC did examine market activity in June to determine whether there has been a significant development that would allow the restrictions to be lifted.
Next week, the regulator announced that it would set up a team of researchers to look into short-selling by foreign investment bankers for illegal activity, including so-called naked short selling.
In South Korea, dressed short-selling, in which an investor small sells stocks without first borrowing them or deciding they can be borrowed, is prohibited.
In October, the Financial Supervisory Service announced that it would likely fine two Hong Kong-based investment banks for their blatant short-selling transactions worth$ 40 billion( US$ 29.58 million ) and 16 billion, respectively.
The regulator fined five international companies, including Credit Suisse, earlier in the year for blatant short-selling.
Uncertainty regarding short-selling regulation has been cited by officials and market observers alike as one of the issues that needs to be resolved for important index provider MSCI to improve South Korea to developed-market status.