Financial Services Commission to Ban Short Selling for 6 Months Starting Next Week... Expansion of Treasury Stock Acquisition Limits

[Image source=Yonhap News]

[Asia Economy Reporter Koo Eun-mo] From the 16th, short selling will be banned for all listed stocks for six months, and the limit on listed companies' treasury stock acquisition will be expanded.

The Financial Services Commission held an emergency meeting on the afternoon of the 13th and decided to ban short selling for all listed stocks in the KOSPI, KOSDAQ, and KONEX markets for six months (March 16 to September 15). This is the third temporary ban on short selling for all listed stocks, following October 2008 and August 2011.

According to the Capital Markets Act and its enforcement decree, the Korea Exchange may restrict short selling with the approval of the Financial Services Commission if there is a concern that market stability or fair price formation may be harmed.

The Financial Services Commission also decided to expand the limit on listed companies' treasury stock acquisition during the same period. This relaxes the daily order quantity limit for treasury stock purchases by listed companies. Until now, listed companies had to acquire treasury stock over about 10 trading days, but starting next Monday, they can purchase the entire amount of treasury stock they wish to acquire in one day within the limit of distributable profits.

Additionally, to curb forced sales of excessive credit loan collateral stocks by securities firms, the obligation to maintain credit loan collateral ratios will be exempted during the same period.

Earlier, on the 10th, the Financial Services Commission announced an expansion of the designation of overheated short selling stocks as the first market stabilization measure, but it has proven insufficient to prevent stock price declines. On that day, the KOSPI fell below the 1700 mark during trading, and the KOSDAQ index also broke below 600.

Due to the stock market crash, circuit breakers were triggered during trading on the KOSPI and KOSDAQ markets that day. It was the first time in the history of the domestic stock market that circuit breakers were triggered simultaneously on the same day. Circuit breakers are a system that temporarily halts stock trading to mitigate market shocks when stock prices fluctuate sharply.

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