South Korea lifts its five year short selling ban

South Korea has lifted its ban on short selling, which has been in place since October 2008.

The country’s Financial Services Commission said in a press release that the ban had been lifted on 14 November.

The short sales of financial stocks have been banned since October 2008, while a ban on the short selling of non-financial stocks was lifted in June 2009 (save for a brief 3 month period in 2011, owing to concerns around the European debt crisis).

“As the stock market have stabilized since the second half of 2013, however, there is a need to shift the government’s regulatory approach to short selling from direct regulations, which has been in place since the financial crisis in 2008, to indirect ones,” said the release.

The commission further announced that it had plans to introduce disclosure requirements for investors if their short selling position in a stock exceeds 0.5 percent of the total shares.

The FSC added that it will establish a legal ground to sanction with corrective order and fine those who violate disclosure requirements.

Currently, financial stocks make up 12 percent of total market capitalisation in the country.