[연합시론] Re-extending the ban on short selling… May ants expand opportunities and restore’trust’

(Seoul = Yonhap News) The Financial Services Commission has extended the ban on short selling of stocks by a month and a half. The Financial Services Commission held an extraordinary meeting on the 3rd and decided to resume short selling of the stocks of the large stocks KOSPI 200 and KOSDAQ 150 from May 3rd. There is no set date when short selling of the remaining 2,37 stocks will resume. The Financial Services Commission completely banned short selling for six months after the stock price plunged due to the post-storm of the novel coronavirus infection (Corona 19) in March last year, and extended the ban in September of that year to March 15 this year. With this renewal, the total ban has been extended to one year and two months based on major sports. The Financial Services Commission also introduced some supplementary measures, such as expanding the access rights of individual investors who have been fiercely opposed to the short sale, while nailing the date of resumption of short selling of major stocks.

Short selling is an investment technique that borrows and sells a stock that is expected to fall in stock, and then repurchases and repays the borrowed stock when the stock price goes down. It is an investment concept that is on the contrary to general stock trading in which stock prices are expected to rise. Therefore, it has a net function to calm down the stock price of overvalued stocks and avoid losses in a bearish market. Short selling is a global standard, and most developed countries operate short selling because of this net function. The problem is that our short selling system is unilaterally advantageous to foreigners and institutional investors with excellent financial and information power. The investment limit allowed for individual investors is also limited, and margins are applied differentially. This is why individual investors, called’Donghak Ants’, have been pressing the politics and government authorities to ban short selling until they improved it, calling it a’tilted playground’. It was also a target of criticism that it did not have a system to filter out illegal non-borrowing short selling in real time, where there is a high risk of payment default.

The reason that the Financial Services Commission decided to resume short selling of large-sized stocks first was in consideration of the impact on the market as short selling, which was temporarily banned, was released. The KOSPI 200 and KOSDAQ 150 are large stocks with a large market capitalization or trading volume, so they are less sensitive to short selling than small stocks. The trading volume is so high that it is difficult to influence the stock price with a short sale of a tolerable amount. The rest of the stocks that have extended the short selling ban without a separate deadline are small stocks, so if there is a small amount of short selling in the market, the stock price may drop sharply. The Financial Services Commission seems to have found a realistic compromise between the determination that the resumption of short selling, which is a global standard, is inevitable, and the pressure of individual investors to strongly oppose the resumption of short selling due to concerns about a fall in stock prices. It is in the same context that the Financial Services Commission emphasized the inevitability of resuming short selling, while inducing a soft landing during the resumption process. Even so, it is difficult to clear the suspicion that the Financial Services Commission, which had a strong chair to resume short selling as planned, stepped back due to opposition from’Donghak ants’ and pressure from the political circles conscious of the by-election in Seoul and Busan in April. ‘Donghak Ants’, which set up a corner with the policy authorities and squeezed the politics, easing the standards for imposing the stock transfer tax and easing the requirements for large shareholders, again showed off its power of intensification by obtaining a re-extended short sale ban.

It is meaningful that the Financial Services Commission re-extended the ban on short selling, but set the date to resume short selling of large-cap stocks on May 3rd. It was because I had to see that there was no re-extension. Until then, the’tilted playground’ needs to be corrected. The Financial Services Commission has expanded the access to short selling for individual investors by securing 3 trillion won in loans to individuals and increasing the number of major securities companies from 6 to 10. It is said that it also establishes a regular short-selling monitoring system to increase transaction transparency. Due to the revision of the Capital Markets Act, from April, penalties have been strengthened so that a fine and a sentence of more than one year in prison for illegal short selling without borrowings. However, this level of complementary measures alone is not enough. If individual investors still have distrust that they lose money through short selling, their dissatisfaction with short selling does not disappear. Prior to the resumption of short selling, the system must be completely established to ensure that illegal transactions are caught and strictly enforced, and that short selling operations do not engage in the stock market. The authorities should keep in mind that short selling is not only a global standard, but efforts to improve the inclined playground must also meet international standards, not’Korean’.

Unauthorized reproduction-prohibition of redistribution>
2021/02/04 11:11 sent