[공매도 갑론을박上] The banned card I pulled out from the crash… Limit reached/side-effect exposure

The pros and cons are intensifying ahead of the deadline for the end of the short selling ban (March 15). Considering the net function of short selling, the argument that it cannot be banned indefinitely and that a stock market crash is inevitable without institutional improvement are striking.

In particular, the backlash from Donghak ants (individual investors) that led the stock market to rise during the ban on short selling is strong. As it stands in a relatively inferior position due to information asymmetry, it is feared that if the short-selling force is on the move, it will suffer damage.

According to the financial investment industry on the 19th, the Financial Services Commission has repeatedly revealed that the temporary ban on short selling will end on March 15 as scheduled.

Short selling is an investment technique in which a stock of a stock that is expected to fall is sold by borrowing and then when the stock price actually goes down, the borrowed stock is repaid at a lower price to make a profit. It is a structure that makes a profit as the stock price falls.

When the stock market became unstable in the aftermath of Corona 19 in March last year, the financial authorities pulled out a’short sale ban’ card. Initially, measures were taken to strengthen the short selling regulation for three months, but as the fluctuation of the stock market increased, it decided to ban short selling for six months (March 16 to September 15, 2020).

The financial authorities have been accused of procrastination over such measures. The domestic stock market plunged on the first day of implementing market measures to significantly strengthen the system for designating short selling overheated stocks. As major stock markets in the US and Europe fell to around 10%, market uncertainty was amplified, and concerns about excessive sell-offs in the overall market also increased.

Despite the rise of short-selling forces, the reason he hesitated to take the entire ban is because it considered the net economic function.

The reason for allowing short selling in the stock market is to ensure that the stock price reaches a reasonable level immediately by ensuring that negative information about the company is supplied to the market smoothly. It plays a role in preventing excessive stock price bubbles from forming.

Accordingly, it was decided not to include market makers during the six-month ban on short selling. In order to increase the liquidity of stocks that were sluggish during this period, exceptions were made.

Market experts diagnose that if the regulation on short selling is excessive, negative cost factors such as a decline in market efficiency will be greater. It is also the basis for the temporary enforcement of the short selling regulation in the past.

In Korea, short selling for 8 months (October 1, 2008-May 31, 2009) and 3 months (August 10, 2011-November 9, 2011) during the 2008 global financial crisis and the 2011 European financial crisis. Banned.

There are also concerns that if the short-selling policy goes against major countries, trust in the domestic capital market from the perspective of foreign investors may be lowered. This means that it may be difficult for foreign investors to inflow stable funds.

Currently, only two countries in the world are banned from short selling in the aftermath of Corona 19, Indonesia and Korea. The United States, the United Kingdom, Germany, and Japan did not ban short selling, and six European Union countries, including Greece, Austria, Spain, Belgium, France, and Italy, in Europe were ) A ban on short selling of stocks was implemented

However, the position against short selling is still strong. Voices to abolish the short selling system are also rising.

It is pointed out that if short selling transactions are resumed without fundamental system improvement, the punishment of’tilted playground’ for foreign investors and’cotton bat’ for illegal short selling will inevitably be repeated.

Individuals’ participation in short selling in the domestic stock market is less than 1%. In fact, short selling was considered the exclusive property of foreigners and institutions with access to information and enormous financial power. Individual investors stand at the bottom of the relative information, and this information asymmetry is likely to lead to a gap in returns among investors.

It is argued that institutional supplementation is necessary to increase the accessibility of individual investors. First of all, you have to borrow stocks to sell short, but for individuals, it is difficult to borrow stocks because it is difficult to determine their credit rating. Due to the strict method of lending stocks from securities finance through securities companies, actual participation in transactions is also sluggish.

In the case of Japan, it is used as a universal means of trading, with individuals accounting for 20% of all short selling transactions. It has a system that allows individuals to easily access short selling through securities finance, and lays the foundation for individuals to participate in short selling for over 2300 stocks (more than 60% of listed stocks) selected by the Tokyo Exchange and Japan Securities Finance. did.

Another problem is that the forces of illegal short selling, such as non-borrowing short selling, are active. In particular, since Korea has a relatively low level of punishment, it is argued that the validity of the sentencing criteria should be verified through comparative studies with major foreign countries.

In addition, according to the government audit data submitted by the Financial Services Commission by Democratic Party Rep. Kim Byung-wook, the amount of 171.3 billion won was detected after illegal short selling by foreign institutions in the past four years (January 2017 to September 2020). However, the penalty imposed on them was only 8.9 billion won, which is 5.2%.

More than 95% of the illegal short-selling agencies were foreign, and except in 2018 Goldman Sachs received a fine of 7.5 billion won.