[공매도, 각각의 입장을 듣다]③ “Net function, misunderstanding of advocates” on the other side of resuming short selling

[서울경제TV=이소연기자] The controversy over the resumption of short selling has been making the market noisy since the beginning of the year. The positions that appear over the short-selling system, which is about to resume in March, are’approve of resumption’,’defer on resumption’, and’opposite to resumption’. The position in favor of the resumption emphasizes the pure function of the system, and the postponement of resumption acknowledges the pure function of the system, but the dysfunction should be supplemented first. Finally, the opposing side of the resumption emphasizes the dysfunction of the system. It is about two months before the resumption of short selling, and I want to hear the arguments of those representing each position and point out the necessity or improvement of the system.

The last order is the position of the’opposite to resumption’ side of the ban on permanent short selling, which recently exceeded 150,000 petitions from the Blue House. I heard the story of the Korean Stock Investors Association’s representative Eui-jeong Jeong, who argues that the net function of short selling is due to the misunderstanding of the advocates of short selling, and that the market can exercise self-cleaning ability without short selling.

Q. You are insisting on the abolition of the short selling system. Why are you insisting on abolishing the system, not improving the system or procrastinating the prohibition period?

CEO Jeong Eui-jeong (hereinafter referred to as Jeong) = Previously, we were in a position not to abolish but to extend the ban for a certain period of time. However, there are two reasons to insist on abolition of the system. The first reason is the recently published thesis at Hanyang University (published by Eunah Lim, Ph.D. in Finance and Finance at Hanyang University, and Professor Sangkyung Jeon at Hanyang University). According to the paper, the average daily return on investment from short selling for three years starting from 2016 is about 39 times higher than that of individual credit loan investment. Converting this to the odds, the short selling force wins at 97.5 vs. 2.5. Looking at the data on the rate of return, I thought that short selling was a system to seize national property, and abolition was the answer.

The second reason is the illegal short sale in March last year. In March of last year, domestic stocks plunged to the 1,400 line and returned to 11 years ago. The reason the stock price fell sharply at the time was due to short selling. Despite the ban on short selling, illegal short selling took place. On March 16, last year alone, short sales of 440 billion won were made. In this regard, a complaint was filed with the Financial Services Commission for a special market maker, but the Financial Services Commission entrusted self-supervision to the Korea Exchange, which operates the market maker system, not the Financial Supervisory Service. As a result, some illegal cases were caught, but it was concluded that it was due to mistakes or errors. I thought that it was a supervision of’crab stuff’, and I was greatly disappointed and insisted on the abolition of the system. However, it does not mean that you have to abolish it immediately. Since it takes time to abolish the law, such as changing the law, it is a position to decide on the existence of the system through social discussions in the situation where the short selling system was banned for an additional year.

Q. If the short selling system improves during the discussion period, do you agree to resume the system?

Jeong = The most important thing is’How much can the slope of the sloped playground be flat?’ I am not asking for a 50-50 win rate for short selling forces and individual investors. Considering their intelligence and financial power, they are asked to make up to the 70/30 level. Although the punishment for illegal short selling has been greatly strengthened recently, monitoring every month to detect illegal short selling is an unstoppable alternative to personal harm. I’m not asking for complete proactive monitoring in real time, but at least you should be able to detect illegal short selling in the process of reviewing same-day transactions. Whether or not to continue the abolition discussion will depend on how much the Financial Services Commission complements this to reduce the difference in win rates between short selling forces and individuals.

Q. In order to compensate for the slanted playground, there is discussion on how to strengthen the accessibility of individual investors to short selling.

Jeong = As of the current situation, we are opposed to expanding the accessibility of individual investors to short selling. After protesting against the’tilted playground’, the authorities are pushing forward to expand the accessibility of short selling to only professional investors with certain qualifications among individual investors. Not only are there not many people who will participate in short selling through this, and individuals must polish at least three years or more in order to compete with foreigners or institutions’ short selling skills. Of course, in this process, the financial authorities must strive to expand the base. This is the reason why the Financial Services Commission recommends the establishment of an organization dedicated to individual investors. For now, I think short selling to domestic individual investors, who have a lot of short-term trading, will have a large adverse effect.

Q. There are also opinions that short selling has a net function, such as’discovering prices, easing bubbles, and supplying liquidity’.

Jeong = You talk about the’price discovery’ function of short selling a lot, and this is their own illusion that’only the short selling force can find the price, and it is better to adjust the price through short selling’. If you look at the KOSPI decline in the last few days, you can see that the market is experiencing any amount of self-cleaning without short selling. It is a misconception that short selling forces are greedy to make money that short selling must intervene to find prices. I admit that short selling increases the trading volume. It is true that if short selling is poured out, the buying forces can catch up and trade that has not been possible. However, short selling funds are mainly short hit funds, and are funds that come in for the purpose of lowering the stock price. If there is a lot of such funds, the stock price falls, which only hurts the people. In the long run, it is more beneficial to the economy that such funds flow out, not inflow.

Q. There are also concerns that the competitiveness of the Korean stock market will decline from the standpoint of foreign investors without the short selling system.

Jeong = It is both right and wrong. After the ban on short selling in March of last year, there was a large withdrawal of foreign capital in the first half of the year, but from July to December, net inflows of foreign capital occurred. Even in November of last year, the maximum inflow of foreign funds on a monthly basis. This year, too, foreign funds are not largely escaping, and it has been proven that the absence of short selling does not mean that foreign funds are lost. In addition, there are some people who insist on the existence of the short selling system for reasons such as global standards or overseas cases. When the short selling force provides examples of other countries that benefit more than 39 times more than individuals or statistics that it is common, I think the argument can be logical.

After the ban on short selling, all statistics are positive except that the short selling force has not made a profit. Tax revenues have increased, corporate values ​​have risen as the index has risen, and the rate of profit among individual investors has risen. If short selling resumes again, the amount of short selling that was suppressed may spill out and panic may come. Currently, there is a story until the extension of the three-month ban, but it is short to improve the system with three months. It is time to extend one year and discuss enough socially. /[email protected]