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Business News/ Markets / South Korea to reinstate stock short-selling ban until June 2024 to 'level playing field'
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South Korea to reinstate stock short-selling ban until June 2024 to 'level playing field'

South Korea will re-instate ban on short-selling shares until June to promote a level playing field for investors.

South Korea to reinstates ban on short-selling shares until June 2024 to 'level playing field' (Image for representation)Premium
South Korea to reinstates ban on short-selling shares until June 2024 to 'level playing field' (Image for representation)

South Korea will re-instate ban on short-selling shares until June to promote a ‘level playing field’ for retail and institutional investors, financial authorities said as reported by Reuters. In May 2021, the ban was lifted for trades involving the shares of companies with large market capitalisation included in the KOSPI200 and KOSDAQ150 share price indices. 

Trading with borrowed shares will be banned for equities on the Kospi 200 Index and Kosdaq 150 Index from Monday until the end of June, Financial Services Commission (FSC) said on Sunday.

The restriction has remained in place for most other stocks.

Short-selling is nothing but selling the borrowed shares to buy back at a lower price and pocket the difference.

"The measure is aimed at fundamentally easing 'the tilted playing field' between institutional and retail investors," Financial Services Commission (FSC) Chairman Kim Joo-hyun told a news briefing as quoted by Reuters.

"Amid continued uncertainty in financial markets, major foreign investment banks have been engaged as a matter of practice in unfair trades ... and we determined that it would be impossible to maintain fair trading discipline," Kim added.

He further added that, “The FSC will review market activity in June to decide whether there is significant improvement to allow the ban to be lifted."

Last week, the regulator had said that it would establish a team of investigators to probe short-selling by foreign investment banks for illegal activity including so-called naked short-selling.

Naked short-selling is nothing but where an investor short-sells shares without first borrowing them or determining they can be borrowed - is banned in South Korea.

In October, the Financial Supervisory Service had announced that it was likely to impose fines on two investment banks located in Hong Kong after determining that they had participated in transactions involving naked short sales valued at 40 billion won ($29.58 million) and 16 billion won, respectively.

Earlier in the year, the regulator had also fined five foreign firms including Credit Suisse for naked short-selling. Officials and market watchers alike have cited uncertainty around short-selling regulation as among factors needing to be resolved for influential index provider MSCI to upgrade South Korea to developed-market status, as reported by Reuters

(With inputs from Reuters)

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Published: 06 Nov 2023, 06:34 AM IST
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