The financial authorities decided to reflect only 50% of the amount of loans (stock loans) when calculating the credit limit for securities companies to promote individual short selling. In addition, a plan to extend the stock rental period was also considered, but the plan is to maintain 60 days as before.
According to the financial authorities on the 21st, the Financial Services Commission recently announced a legislative amendment to the rules of the financial investment industry, which allows the chairman of the Financial Services Commission to decide separately how to calculate each type of credit grant.
Currently, the amount of credit loans and loans has been simply summed up when calculating the size of a credit grant, but in the future, the amount is calculated separately in a manner determined by the chairman of the Financial Services Commission. The credit limit, including credit loans and lenders, is 100% of the equity capital of securities companies.
According to the new calculation method, only about half the size of lenders is recognized. The Financial Services Commission explained that credit loans are usually a calculation method that reflects the risk diversification effect because the risk of loss increases when the stock price falls and individual loans for short selling increase when the stock price rises.
In reality, there is a side that accepts the point that it would be difficult for individuals to borrow stocks from securities companies for short selling because the capacity of various securities companies’ credit limit has already been exhausted even with the size of credit loans for’debt investment’ (investment by debt). .
This is because there is no incentive to give up credit loans, which are advantageous in terms of profits and demand, and to actively expand lenders, because if the amount of loans by securities firms increases, the limit on credit loans is reduced.
However, the financial authorities decided to keep the repayment period of individual loans for 60 days as before when the short sale resumes.
It was pointed out that if individual investors borrow stocks for short selling, they can only lend them for 60 days, so the repayment period is shorter compared to the loan market used by foreigners and institutions. Accordingly, the financial authorities reviewed whether or not to extend the repayment period, but decided to apply the previous period as it was in the judgment that if an additional repayment period is given,’quantity lock’ may occur.
The financial authorities plan to partially resume short selling for KOSPI 200 and KOSDAQ 150 from May 3, after final system improvement and preparation work has been completed.