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FSC confirms lifting of short selling ban on March 31

Published: 21 Mar. 2025, 18:32

SHIN HA-NEE
[email protected]

A demonstration of illegal short selling takes place at the Korea Exchange in Yeouido, western Seoul, on March 19. [YONHAP]

Korea will lift its temporary ban on short selling on March 31 as planned, the Financial Services Commission (FSC) said Friday, 16 months after it went into effect.

The financial regulator convened a meeting that day to monitor the preparation process for the approaching resumption and reaffirmed the lifting of the ban, in line with the previously announced schedule.

Out of 97 institutional investors, 83 firms are expected to qualify for short trading by March 31, according to the FSC. Twenty-one institutions, representing 81 percent of all short-selling transactions, are currently participating in trials for the Naked Short-Selling Detecting System (NSDS), a newly built centralized system designed to detect short-selling transactions and prevent illegal practices.

The NSDS needs to be linked to separate electronic balance management systems set up by each institutional investor. However, institutions that place short-selling orders after entering borrowed stocks into their accounting system will be exempt from the mandatory system installation.

The Korean government implemented a temporary ban on short selling during the Covid-19 pandemic in March 2020, which it later partially lifted in May 2021 to allow the practice for 200 Kospi-listed stocks and 150 Kosdaq-listed ones.

However, regulators fully reinstated the ban in November 2023 after uncovering cases of naked short selling, the illegal practice of shorting stocks without first borrowing them, at global investment banks. The suspension, which was originally set to be lifted by June of last year, was extended for an additional 10 months, and the authorities announced a major regulatory and systemic overhaul.

BY SHIN HA-NEE [[email protected]]