South Korea hardens short selling standards
10 November 2016 Seoul
Image: Shutterstock
South Korea’s financial authority has pledged to bolster its short selling and disclosure regulations in a bid to reinforce investor protection.
The Korean Stock Exchange will be handed new powers to withdraw "overheated" stocks that receive “extraordinary increases in short selling and sharp falls in prices” during a single day for a 24-hour cooling off period, as outlined in a statement by Korea’s Financial Services Commission (FSC).
The specific details of when the exchange will consider a stock to have 'overheated' will be outlined prior to the new rules implementation in early 2017.
The deadlines for reporting and disclosure of short positions in large amounts or by shares will also be shortened from T+3 to T+2 by the end of 2016.
In addition, those short a stock during the period of paid-in capital increase will be barred from buying the newly-issued stocks.
The FSC promised to strengthen sanctions against those who violate its short selling rules.
Rules such as the prohibition of uncovered short-selling or up-tick rules will be subject to “heftier fines” than those imposed on other violations.
Furthermore, price manipulative activities exploiting short-selling positions will be added to types of ‘market disruptive activities’ under the Financial Investment Services and Capital Markets Act. Further details on the enhanced penalties is expected in early 2016.
The Korean Stock Exchange will be handed new powers to withdraw "overheated" stocks that receive “extraordinary increases in short selling and sharp falls in prices” during a single day for a 24-hour cooling off period, as outlined in a statement by Korea’s Financial Services Commission (FSC).
The specific details of when the exchange will consider a stock to have 'overheated' will be outlined prior to the new rules implementation in early 2017.
The deadlines for reporting and disclosure of short positions in large amounts or by shares will also be shortened from T+3 to T+2 by the end of 2016.
In addition, those short a stock during the period of paid-in capital increase will be barred from buying the newly-issued stocks.
The FSC promised to strengthen sanctions against those who violate its short selling rules.
Rules such as the prohibition of uncovered short-selling or up-tick rules will be subject to “heftier fines” than those imposed on other violations.
Furthermore, price manipulative activities exploiting short-selling positions will be added to types of ‘market disruptive activities’ under the Financial Investment Services and Capital Markets Act. Further details on the enhanced penalties is expected in early 2016.
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