Short-selling ban could be lifted by next Q1: FSS chief

Financial Supervisory Service Gov. Lee Bok-hyun speaks during a press conference at the agency's headquarters in western Seoul on March 11. [YONHAP]

The current ban on stock short selling may remain in place until the first quarter of next year, by which the upcoming detection system for illegal trades will be completed, Financial Supervisory Service (FSS) Gov. Lee Bok-hyun said Monday.

The system, currently under development by the FSS and the country’s bourse operator, the Korea Exchange (KRX), has been cited as a prerequisite for rescinding the prohibition on short sales by the government.

“The policy direction of restarting short trading after the establishment of the illegal trading detection system remains unchanged,” said Lee during a radio appearance, adding that he expects the system to be fully completed by the first quarter of next year.

However, Lee mentioned that gradual easing of the restrictive measures may be possible depending on the effectiveness of the internal control systems of each investment firm.

Moreover, the governor once again stressed that his “personal wish” is to partially lift the ban in June if possible, following a previous comment signifying potential easing next month. The FSS later issued a statement emphasizing that the comment merely reflected the governor’s personal preference.

KRX CEO Jeong Eun-bo also expected the completion of the detection system to take about 10 months at the earliest, and up to a year, during a press conference commemorating his 100th day in the office.

“We will do our best to accelerate [the development of the system], but shortening the process is not all that matters; whether we can establish a stable detection system is another key question,” said Jeong.

Naked short selling, an illegal practice in Korea, is shorting stocks without first borrowing them. Authorities banned short selling through June after finding that some global investment banks had made such trades. The ban is expected to be extended until preventive measures, namely the monitoring system, are adopted.

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]