Financial Services Commission Bans Short Selling for 10 Trading Days When Designating Overheated Stocks

[Asia Economy Reporter Park Jihwan] The Financial Services Commission announced on the 10th that starting from the 11th, it will ease the designation criteria for short-selling overheated stocks for three months as part of measures to stabilize the stock market.

When a stock is designated as a short-selling overheated stock, short selling will be banned for 10 trading days (2 weeks) starting from the 11th. Currently, if a stock is designated as a short-selling overheated stock, short selling is prohibited only for one trading day following the designation.

Short selling refers to an investment method where an investor borrows stocks they do not own, sells them anticipating a price drop, and later buys them back at a lower price to return the stocks and earn a profit.

On this day, the Financial Services Commission also decided to expand the scope of stocks subject to overheated designation. From now on, if the short-selling transaction amount of a KOSPI stock that has fallen more than 5% in a day increases by three times (currently six times) compared to usual, it will be designated as an overheated stock. For KOSDAQ, this threshold for the increase in short-selling transaction amount will be significantly lowered from five times to two times. The increase rate is calculated by comparing the short-selling transaction amount on the day for the stock to the average short-selling transaction amount over the previous 40 trading days.

Additionally, for stocks that have fallen more than 20%, new criteria have been established where the short-selling transaction amount increase multiplier is set at two times for KOSPI and 1.5 times for KOSDAQ.

The Financial Services Commission stated that the revised criteria (exchange enforcement rules) will be implemented on the day, and if the exchange announces the short-selling overheated stocks after market close, short selling will be banned for those stocks for 10 trading days (2 weeks) starting from the 11th.

This content was produced with the assistance of AI translation services.