[2020 National Audit] Financial Supervisory Service "Considering Introduction of Hong Kong-Style Short Selling in Korea... Excluding Small-Cap Stocks"

Yoon Seok-heon, Governor of the Financial Supervisory Service, is attending the audit of the Financial Supervisory Service at the Political Affairs Committee held at the National Assembly on the 13th, responding to questions from lawmakers. Photo by Yoon Dong-ju doso7@

[Asia Economy Reporter Park Jihwan] The Financial Supervisory Service (FSS) is considering introducing a Hong Kong-style short selling system, where short selling is only allowed for stocks with a market capitalization above a certain level, instead of abolishing short selling altogether.

On the 13th, during the National Assembly's Political Affairs Committee audit report, the FSS stated, "We will review a plan to designate stocks eligible for short selling based on certain criteria through an analysis of the Hong Kong case."

In particular, the FSS believes that restricting short selling on small-cap stocks would be the most effective measure. The FSS explained, "It is necessary to restrict short selling on small-cap stocks, which are easy to manipulate in price and have a high proportion of individual investors."

Hong Kong started with 17 pilot stocks in 1994, and detailed requirements were established in the Hong Kong Stock Exchange regulations in 2001. The purpose is to protect companies with small market capitalizations or those vulnerable to large price fluctuations or price manipulation due to short selling.

Governor Yoon previously expressed a similar stance during last year's audit, stating that the Hong Kong-style short selling designation system is worth considering. At that time, Governor Yoon said, "I think it might be possible to abolish some short selling," and added, "It seems possible to abolish a certain portion of the short selling market, as seen in countries like Hong Kong."

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