The financial authorities have decided not to extend the ban on short selling that will end in March. With the aim of resuming short selling, it is a position to complete system improvement, such as strengthening punishment for illegal short selling and enhancing personal access to short selling. There are concerns that the domestic stock market, which is recording an all-time high, may plunge if individual investors start to leave with the resumption of short selling.
Regarding whether short selling resumes on the 11th, the Financial Services Commission said, “The temporary ban on short selling due to Corona 19, which is currently in effect, is scheduled to end on March 15.” “Financial authorities strengthened punishment for illegal short selling, aiming to resume short selling in March. “We plan to finalize the system improvement, such as improving the system for the creators and improving the accessibility of individual short selling.”
It seems that they have once again confirmed the fact that the ban on short selling is expected to be ended rather than to end or extend. The Financial Services Commission is in the position that “nothing is officially decided.”
Short selling refers to the sale of stocks by borrowing when stock prices are expected to fall. Although it is a legitimate transaction allowed by the government, there are many criticisms that it is abused by institutions and foreigners as a means of controlling market prices. It is for the same reason that individuals complain of damage caused by short selling and request abolition.
According to the’Foreign Investment Restriction System Log Records’ received by Park Yong-jin, a member of the National Assembly’s Political Affairs Committee, and from the Financial Supervisory Service, the number of foreign investors rejecting short selling due to insufficient balance in August of last year was totaled 14,024. This means that there were more than 10,000 attempts to sell non-borrowing short sales, which were prohibited by law.
Individual investors demand an extension of the short selling ban. Eui-jeong Eui-jeong, president of the Korea Equity Investors Association (Han Tu-yeon), an individual investor rights protection organization, said, “It is necessary to extend the ban on short selling for the national economy and the public.” It is correct to see it as a normalization stage, not overheating.”
Political circles also insist on extending short selling. Rep. Park Yong-jin said, “In the stock market, it can be seen that the level of non-borrowing short selling is higher than the level sanctioned by the financial authorities.” “I said.
The Democratic Party’s Supreme Commissioner Yang Hyang-ja also emphasized at the Supreme Council on the day that “the market unrest over the dysfunction of short selling is high,” and that “we must seriously consider the extension of the short selling ban.”
On the other hand, the FSC is putting weight on resuming short selling. Finance Commissioner Eun Seong-soo said at last month’s year-end conference, “We are improving the system to reduce individual distrust of short selling.”
There is also a refutation that short selling should be resumed given the net function of short selling. It is argued that short selling is also playing a role in increasing trading volume and removing the bubble of overvalued stocks.
“The current stock market has entered a short-term overheating phase,” said Hwang Se-woon, a research fellow at the Capital Markets Institute. “If the ban on short selling is extended, the stock market bubble could grow. We must not forget the net function of short selling.”
Reporter Yoon Jin-woo [email protected]
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