Presidential Office, "Complete Ban on Short Selling... Determined to Eradicate Disruptive Practices"

Financial Services Commission to Ban Short Selling Completely Until First Half of Next Year... Strict Crackdown on Illegal Short Selling
Presidential Office "Market Trust Collapsing and Investor Withdrawal... Serious Issues to Follow"

The Presidential Office stated on the 5th regarding the financial authorities' announcement of a 'temporary full ban on short selling' that they are determined to "eradicate illegal short selling and market manipulation using short selling." President Yoon had pledged during the last presidential election to impose criminal penalties on illegal short selling equivalent to stock price manipulation.

A representative from the Presidential Office added, "If unfair competition continues, leading to a loss of trust in the market and investors withdrawing, it could result in problems far more serious than the side effects of banning short selling."

[Image source=Yonhap News]

On the same day, the Financial Services Commission announced that it had decided to impose a full ban on short selling for all domestic stock market items from the 6th until the end of June next year. Short selling is an investment practice where stocks or bonds are borrowed and sold without owning them, then repurchased later to return the borrowed securities. It is a strategy to gain capital gains by buying at a low price and selling at a higher price when a stock price decline is expected.

However, the Financial Services Commission diagnosed that amid the recent global economic slowdown and increased uncertainty in the Korean economy due to the Israel-Hamas armed conflict, concerns about fair price formation in the domestic stock market have grown as illegal naked short selling by foreign and institutional investors has been repeatedly detected. Nevertheless, the decision on whether to resume short selling after the first half of next year will be made by considering overall conditions at that time, including market trends and the implementation status of institutional improvement measures.

Meanwhile, during his presidential campaign, President Yoon pledged not only criminal penalties for illegal short selling equivalent to stock price manipulation but also ▲reasonable adjustment of collateral ratios between institutional/foreign and individual investors ▲application of circuit breakers that automatically ban short selling in case of excessive stock price declines.

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