Ruling Party Advocates Temporary Ban on Short Selling... "Correcting the Tilted Playing Field"

"Resumption of Short Selling After Measures Are Taken"

Voices are continuously emerging within the ruling People Power Party calling for a temporary ban on short selling until measures to eradicate illegal short selling are found.

People Power Party lawmaker Yoon Sang-hyun. [Photo by Yonhap News]

On the 5th, Representative Yoon Sang-hyun stated on his social media (SNS), "There is a need for practical measures to eradicate illegal short selling, including the recently raised issue of a temporary ban on short selling."

Representative Yoon pointed out, "(The financial authorities) have adjusted the collateral ratio and repayment period for individual investors' short selling to improve the short selling system, but the playing field remains tilted against individual investors." He added, "The financial authorities must demonstrate a strong will to severely punish market disruption activities and eradicate illegal acts," and "It should be possible to recover profits and impose criminal penalties upon detection."

He also said, "To maintain the positive functions of short selling, short selling by small investors should be institutionalized," and "It is desirable to maintain short selling by institutionalizing a system that allows individuals to borrow stocks and short sell, as in the United States." He continued, "Measures such as the introduction of computerized short selling, adjustment of repayment periods and ratios, and strengthening penalties for illegal short selling should be specifically proposed and implemented," emphasizing, "The main public opinion is to temporarily ban short selling until such a system is established."

Earlier, on the 1st, Representative Kwon Seong-dong of the same party also expressed on SNS his full agreement with the public opinion for a temporary ban on short selling, writing, "Illegal short selling should be punished on par with stock price manipulation."

Representative Yoon Chang-hyun of the People Power Party, a member of the Political Affairs Committee, also said at the National Assembly Political Affairs Committee comprehensive audit on the 27th of last month, "It seems the time has come to completely suspend short selling for about three to six months and establish fundamental measures," adding, "Short selling should be resumed only after minimizing discrimination against individuals compared to institutions and foreigners related to illegal short selling or after taking measures that do not raise doubts about fairness or reliability."

The reason ruling party lawmakers have consecutively called for a temporary ban on short selling is due to the Financial Supervisory Service recently announcing that it uncovered illegal short selling worth hundreds of millions of won by global investment banks (IBs) such as BNP Paribas and HSBC.

Short selling refers to a trading technique where stocks expected to decline in price are borrowed and sold, then later repurchased at a lower price to return the borrowed stocks, thereby earning a profit. If the stock price actually falls, profits can be made, but if the price continues to rise, losses occur.

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