Eun Sung-soo, "Will Improve Individual Investors' Access to Short Selling"

[Image source=Yonhap News]

[Asia Economy Reporter Eunmo Koo] Financial authorities have indicated their intention to devise measures to expand individual investors' access to the short-selling system, which has been criticized as a "tilted playing field" due to significantly lower accessibility compared to institutional and foreign investors.

On the afternoon of the 27th, Eun Sung-soo, Chairman of the Financial Services Commission, stated at the 'Securities Association Meeting' held at the Korea Financial Investment Association that they are exploring ways to activate individual participation in short selling from the perspective of expanding opportunities.

Chairman Eun said, "The core argument of those opposing short selling was that there could be illegal elements in short selling by institutions and foreigners, and that individuals have low institutional accessibility to short selling." He evaluated, "The increasing demands for transparency and fairness of opportunity across our economic society are also appearing in the field of short selling."

He added, "Activating individual short selling is somewhat cautious considering recent loss issues seen in some private equity funds, but we plan to seek improvement measures from the perspective of expanding opportunities." He also mentioned that they plan to re-examine the necessity and side effects of the market makers' functions and roles.

He also emphasized the need for institutional improvements for individual investors beyond short selling. Chairman Eun pointed out, "While the Bank of Korea lowered the base interest rate by 75 basis points (bp) this year, there are securities firms that did not change their margin loan interest rates at all," and said, "It is a natural right for individual investors to point out the opacity and irrationality of this and demand improvements."

Regarding individual investors' demands for more new stock allocations than the current system during the initial public offering process, he said, "It is inevitable to allocate a certain amount to institutions first to encourage participation in demand forecasting," but added, "The current allocation method among individual investors, where those who pay more subscription deposits receive more shares, favors high-net-worth individuals and needs improvement."

He also mentioned that market liquidity should flow into productive sectors. Chairman Eun stated, "If the listing of companies with high growth potential continues and stock prices rise overall, not only will investors and companies both 'win-win,' but the stock market can become a major channel to direct funds into productive sectors," and added, "We will revise listing standards to allow early listing of companies with high growth potential even if they currently have no sales or profits."

He further emphasized the role of securities firms as venture capital. Chairman Eun said, "Although securities firms' performance has recently improved significantly, the current business structure of the securities industry is somewhat detached from the real economy, according to market evaluations," and added, "This market evaluation can only change when securities firms faithfully fulfill their original role of discovering potential companies and projects and making bold investments."

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