Need for improvement of’tilted playground’ alienation of individual participation
High investment risk, hard to solve without limits
Like a private equity fund, it seems to be given a limit on whether it is eligible or not
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It is known that the financial authorities are considering expanding short selling opportunities to individuals and applying investment limits ahead of the resumption of short selling in March.
According to the financial authorities and the financial investment industry on the 11th, the Financial Services Commission is looking at a method of differentially granting investment limits according to the requirements for individual investors who can sell short.
Short selling is an investment technique that realizes a profit by borrowing and selling stocks when the stock price is expected to fall and then buying and repaying stocks when the stock price goes down. Since you can trade without holding stocks, if the stock price falls as expected, you can achieve a high return on investment compared to the investment. However, if the stock price rises due to a misunderstanding, the loss can indefinitely expand. Therefore, financial authorities have strict restrictions on short-selling investments in the judgment that it is necessary to manage risk. However, ahead of the resumption of short selling in March, the financial authorities promised to rectify the system after complaints that the current system is a’tilted playground’ where only foreign and institutional investors participate. In fact, the proportion of individuals in the total short selling market, which amounts to 15 trillion won in 2019, accounts for only 1.5%, or 23 billion won.
According to related industries, financial authorities are known to be struggling to set limits while allowing private investments for short selling, just as they set investment limits for private equity investors or crowdfunding investors. Private equity funds, for example, restrict investments only to’qualified investors’, which mean professional investors and ordinary investors with certain requirements. In addition, crowdfunding is also differentiated so that ordinary investors can invest up to 10 million won, eligible investors 20 million won, and professional investors can invest without restrictions.
In addition, the Financial Services Commission, along with Korea Securities Finance, is building a real-time integrated trading system that allows securities companies and investors handling loan services to immediately check the available amount of loans by item. When the system is completed, the size of stocks that can be rented by individuals is expected to increase to the level of KRW 1.4 trillion, about 20 times the current level. It is known that the Financial Services Commission is investigating whether or not to participate with a total of 10 companies, including six securities companies that have provided loan services to individual investors.
/ Reporter Kim Kyungmi [email protected]
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