South Korea to introduce short selling report rule
04 July 2012 Seoul
Image: Shutterstock
Short sellers will be required to provide reports on their short positions in South Korea as of 30 August so that regulators will have more access to data on short selling activities.
South Korea’s Financial Services Commission (FSC), Financial Supervisory Service (FSS) and Korea Exchange (KRX) are introducing the mandatory reporting requirement following a three-month ban on short selling that was implemented in August 2011.
In a joint statement, the FSC and the FSS said: “Short selling provides liquidity through diverse investment strategies and is an efficient price discovery mechanism. However, there were also concerns that short selling would distort market order and be abused for unfair trading in times of unstable stock markets.”
The rule will apply to an investor who has an open short position of 0.01 percent or above of the issued share capital of a KGX-listed company. Investors who meet the threshold will have three-working days to file their reports with regulators, while investors who continue to meet or exceed the threshold will have to report regulators at the end of each trading day.
The FSC and the FSS added: “The proposed rule is designed to have a better picture of the overall short selling activities and a systematic collection of data on outstanding short positions so that regulators can cope with unfair trading in a timely manner.”
Investors will have to provide the name of the short-sold stock, the name and other personal information of the reporting individual, the total quantity of open short positions of the short-sold stock and the proportion of short positions to the issued share capital in a report to be filed electronically through the FSS website.
Implementation of the rule will require amendments to the Regulation on Financial Investment Services, as well as FSC approval in August.
South Korea’s Financial Services Commission (FSC), Financial Supervisory Service (FSS) and Korea Exchange (KRX) are introducing the mandatory reporting requirement following a three-month ban on short selling that was implemented in August 2011.
In a joint statement, the FSC and the FSS said: “Short selling provides liquidity through diverse investment strategies and is an efficient price discovery mechanism. However, there were also concerns that short selling would distort market order and be abused for unfair trading in times of unstable stock markets.”
The rule will apply to an investor who has an open short position of 0.01 percent or above of the issued share capital of a KGX-listed company. Investors who meet the threshold will have three-working days to file their reports with regulators, while investors who continue to meet or exceed the threshold will have to report regulators at the end of each trading day.
The FSC and the FSS added: “The proposed rule is designed to have a better picture of the overall short selling activities and a systematic collection of data on outstanding short positions so that regulators can cope with unfair trading in a timely manner.”
Investors will have to provide the name of the short-sold stock, the name and other personal information of the reporting individual, the total quantity of open short positions of the short-sold stock and the proportion of short positions to the issued share capital in a report to be filed electronically through the FSS website.
Implementation of the rule will require amendments to the Regulation on Financial Investment Services, as well as FSC approval in August.
NO FEE, NO RISK
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to Securities Finance Times
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to Securities Finance Times
