Lee Yeon-woo is a financial journalist at The Korea Times. Her wide range of reporting includes policies, macroeconomics, stock market, companies and even crypto. She is passionate about connecting the dots in Korean finance and making it easier for foreign nationals to understand. Based on her previous experience as a national reporter, she also has a keen interest in social issues within the sector, including gender equality and ESG. Your tips and insights are always appreciated. You can send them to yanu@koreatimes.co.kr.
FSS governor hints at expanding short selling ahead of March 31 resumption
Financial Supervisory Service Gov. Lee Bok-hyun speaks during a forum on stock market infrastructure improvements held at the Korea Exchange's headquarters in Seoul, Thursday. Yonhap
By Lee Yeon-woo
Financial Supervisory Service (FSS) Gov. Lee Bok-hyun said Thursday that he believes expanding short selling to a wider range of stocks is necessary as financial authorities prepare to resume short selling on March 31.
Short selling has been banned since November 6, 2023, after financial authorities uncovered illegal short-selling activities by some global investment banks, including BNP Paribas and HSBC.
Before the ban, Korea only permitted short selling for 350 stocks included in the KOSPI 200 and Kosdaq 150 indices. Lee's remarks indicated that he supports expanding the range of eligible stocks beyond this previous limit.
"I acknowledge that a full resumption of short selling could be burdensome, particularly due to so-called 'zombie companies,' as Korea's stock market has weakness in its delisting and evaluation systems," Lee told reporters after attending a forum on stock market infrastructure improvements held at the Korea Exchange's (KRX) headquarters, Thursday.
"However, as we reduce market volatility, restoring confidence from foreign and retail investors is equally crucial. From this perspective, I personally believe that reinstating short selling across a broader range of stocks is necessary," he added.
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"Unless the Financial Services Commission (FSC) makes a separate decision at its regular meeting, short selling will resume on March 31," Lee said. "The FSS will assess the KRX's readiness and report to the FSC next month, enabling them to decide whether any additional short-selling restrictions are needed."
Lee also expressed confidence in the central short selling monitoring system developed by the FSS. "Simulations using the newly implemented system showed that it can prevent nearly 99 percent of the issues that occurred in the past."
"While the resumption of short selling and high-frequency trading may contribute to downward pressure and increased market volatility, they also play a positive role. By improving liquidity, they help strengthen and broaden the foundation of our stock market," he said. "Simply blocking these practices is not the answer."