Financial regulator not to extend ban on short-selling

Financial Services Commission (FSC) Chairman Eun Sung-soo speaks at a meeting held at the government complex in central Seoul, last Friday. / Yonhap

By Anna J. Park

Following Chairman Eun Sung-soo's comments at the National Assembly earlier this week that the Financial Services Commission (FSC) will lift its ban on short-selling next March as planned, the financial regulator once again reaffirmed its position that it would not extend the restriction when the ban of one year ends next March 15

In a phone conversation with The Korea Times, FSC spokesman Seo Jung-a said the financial authority had no plans to extend the short-selling ban.

“Just as Chairman Eun said about the issue at the National Assembly earlier this week, the short-selling rule ends next March 15 as announced previously. Although the resumption presupposes the passage of bills ― that are currently under review at the Assembly ― about strengthening punishments for illegal short-selling practices,” the spokesman said, stressing that the financial regulator aims to level the playing field by scrutinizing any illegal use of short-selling.

Also, the FSC is not currently considering changing the short-selling system here to something like that of Hong Kong, which puts more restrictions on the practice; for instance, only allowing short-selling for companies with a market capitalization exceeding 3 billion Hong Kong dollars and a daily turnover surpassing 60 percent of this.

The FSC submitted documents to the National Assembly upon request recently to specify its position on short-selling for the purpose of deliberating on revision bills related to the practice. Currently, there are a few bills pending at the Assembly about revising the nation's Capital Market Law to strengthen punishments for illegal practices related to short-selling.

“For the time being, the FSC is not considering extensive exceptions about short-selling based on market caps or short-selling periods,” the official added.

Earlier this week, Chairman Eun said the FSC was working on building a thorough monitoring system by the end of the year in order to prevent naked short-selling, when he attended a National Assembly committee meeting Tuesday. He also reiterated that short-selling will be resumed, as planned, from mid-March next year, vowing to correct the system's unfair playing field for retail investors.

The nation's financial authority put a temporary six-month ban on short-selling in mid-March this year, when the stock markets plunged with the shock from the COVID-19 pandemic. In August, the FSC extended the ban for six more months until March 15.