Financial Authorities to Hold Public Hearing in August on Extension of Short Selling Ban

[Image source=Yonhap News]

[Asia Economy Reporter Eunmo Koo] Financial authorities will hold a public hearing in August to gather various opinions on the short-selling ban measures. Research results on the correlation between the short-selling ban measures, which have been in effect since March, and the stock market will also be announced at this event.

According to the financial industry on the 17th, the Financial Services Commission plans to communicate with the market about the effects of the short-selling ban and possible improvements to the short-selling system through two or more public hearings in August. Although the discussants have not been finalized, opinions from various sectors of society, including financial investment industry officials, academia, and the media, will be collected.

They are also considering ways to directly listen to investors' voices. In this regard, the Financial Services Commission, together with the Korea Exchange, will disclose the results of a research project titled "Market Impact of Short Selling and Desirable Regulatory Measures" at the public hearing. This will include content on whether the short-selling ban measures influenced the rapid rebound of the stock market after the COVID-19 pandemic.

As the KOSPI recently stabilized and approached the 2200 mark, opinions have poured in that the short-selling ban played a positive role in the stock market recovery. In particular, individual investors are actively voicing their opinions on the Blue House's public petition board, calling for the abolition or improvement of the "tilted playing field" nature of the short-selling system, which they say favors foreigners and institutions.

On the other hand, many opinions argue that the stock market stimulus effect cannot be conclusively determined. Financial Services Commission Chairman Eun Sung-soo recently stated at a press briefing on the financial policy direction for the second half of the year, "Fortunately, stocks have risen significantly, but it requires a sober analysis to determine whether the rise is due to the short-selling ban or because the global market rose together." There are also views that short selling naturally acts as a control mechanism by increasing trading volume and removing bubbles from overvalued stocks.

The Financial Services Commission plans to decide whether to proceed with the scheduled resumption of short selling in September based on market impact analysis. At the same time, they are preparing improvements to the short-selling system. First, the Financial Services Commission is preparing a bill to strengthen penalties for illegal naked short selling. In 2018, a bill was proposed to impose criminal penalties of more than one year and fines up to 1.5 times the unfair gains for violations of short-selling regulations, but it was discarded in the 20th National Assembly.

They are also considering revising the "uptick rule." The uptick rule prohibits placing bids below the market transaction price (the last executed price) during short selling to prevent sharp price drops, but it has been criticized for having many exceptions and difficulties in effective monitoring and supervision.

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