[Reporter’s Notebook] "A Deceptive Government Urging 'Ants' to Engage in Short Selling"

[Image source=Yonhap News]

[Asia Economy Reporter Lee Seon-ae] "Compared to institutions and foreigners, the threshold for short selling by individual investors, which was more stringent, has been lowered, so the 'tilted playing field' has been straightened. Now all that's left is to go out and fight, right?"

Individual investors became even more outraged over the Financial Authorities' announcement of the 'Measures to Strengthen Detection and Punishment of Illegal Short Selling and to Supplement Short Selling-related Systems.' Jeong Eui-jeong, the representative of the Korea Stock Investors Association, which has about 51,000 individual investor members, harshly criticized it as a 'deterioration rather than reform,' calling it a 'deceptive measure' that completely ignores the demands of individual investors.

Individual investors have been demanding adjustments to collateral ratios and mandatory short selling repayment periods. They want the so-called 'tilted playing field,' where only institutions and foreigners benefit and individuals suffer losses, to be fixed. They have requested not to lower individual collateral ratios but to raise those of institutions and foreigners to prevent reckless short selling. Additionally, they asked to limit the practically unlimited short selling repayment period for institutions and foreigners to the individual level (90 days). However, the Financial Authorities decided to lower the individual short selling collateral ratio from the current 140% to 120%, narrowing the gap with institutions and foreigners (105%). The request to limit the unlimited repayment period for institutions and foreigners was rejected on the grounds that it is "difficult due to international practices."

Even before this supplementary measure was introduced, there had been continuous criticism that the direction of the authorities' system improvement was fundamentally wrong. Many experts argued that instead of loosening regulations on individuals to the level of institutions and foreigners, regulations on institutions and foreigners should be strengthened to the level of individuals. This is because even if individual regulations are eased, individuals cannot compete with institutions and foreigners in terms of information and capital strength. Ultimately, the collective demands that individuals have been making were ignored.

With the lowered threshold for short selling, individual investors now have more opportunities to short sell. Now they just need to win the short selling competition against institutions and foreigners. Since the government has prepared 'after-the-fact' measures focused on sanctions and punishments, such as the designation system for overheated short selling stocks, rather than protection and prevention, what could be the problem? The government is taking credit for supposedly fixing the 'tilted playing field' in its own way.

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