Taiwan lifts short selling ban early
10 June 2020 Taipei
Image: Jaochainoi1980/Shutterstock
Taiwan’s Financial Supervisory Commission (FSC) has revoked its ban on short selling transactions 10 days early due to calmer trading conditions following the extreme volatility caused by the spread of COVID-19 in February and March.
The restriction has been in place since 20 March and applied to equities traded on the Taiwan Stock Exchange and the Taipei Exchange that declined by more 3.5 percent or more in value in a single trading session.
The ban was expected to remain in place until the 19 June but has been removed early to reflect that fact that the COVID-19 outbreak in the country is now under control and the consequential impact of markets has also significantly reduced, according to the Securities and Futures Bureau deputy director-general Tsai Li-ling.
At the height of the volatility in March, just prior to ban’s implementation, the country's main index, TAIEX, fell by 5.8 percent to its lowest level in several years.
The lifting of restrictions by Taiwan's FSC was welcomed by the Pan Asia Securities Lending Association (PASLA), which also called on other Asian markets that are maintaining their shorting bans to consider following suit.
“We ask Asian markets that are still restricting short-selling to consider how securities lending and the ability to take short positions can help to create liquidity, reduce costs for market participants, manage risk in investors’ portfolios and encourage good corporate governance,” PASLA explains. “Over the long term, we believe that markets in which participants can express different views will be more resilient and better positioned to support economic growth and prosperity.”
Elsewhere in Asia, South Korea, Indonesia and Malaysia are maintaining their own bans for now.
South Korea’s curb on short selling, which affects all traded securities, is due to expire on 16 September, while Malaysia’s blanket ban was originally set to expire in April but was extended until 30 June.
Indonesia is yet to define the timeframe for its ban.
Taiwan FSC’s decision comes shortly after European national regulators chose to lift similar restrictions on short selling that also came as a reaction to the COVID-19 pandemic.
The restriction has been in place since 20 March and applied to equities traded on the Taiwan Stock Exchange and the Taipei Exchange that declined by more 3.5 percent or more in value in a single trading session.
The ban was expected to remain in place until the 19 June but has been removed early to reflect that fact that the COVID-19 outbreak in the country is now under control and the consequential impact of markets has also significantly reduced, according to the Securities and Futures Bureau deputy director-general Tsai Li-ling.
At the height of the volatility in March, just prior to ban’s implementation, the country's main index, TAIEX, fell by 5.8 percent to its lowest level in several years.
The lifting of restrictions by Taiwan's FSC was welcomed by the Pan Asia Securities Lending Association (PASLA), which also called on other Asian markets that are maintaining their shorting bans to consider following suit.
“We ask Asian markets that are still restricting short-selling to consider how securities lending and the ability to take short positions can help to create liquidity, reduce costs for market participants, manage risk in investors’ portfolios and encourage good corporate governance,” PASLA explains. “Over the long term, we believe that markets in which participants can express different views will be more resilient and better positioned to support economic growth and prosperity.”
Elsewhere in Asia, South Korea, Indonesia and Malaysia are maintaining their own bans for now.
South Korea’s curb on short selling, which affects all traded securities, is due to expire on 16 September, while Malaysia’s blanket ban was originally set to expire in April but was extended until 30 June.
Indonesia is yet to define the timeframe for its ban.
Taiwan FSC’s decision comes shortly after European national regulators chose to lift similar restrictions on short selling that also came as a reaction to the COVID-19 pandemic.
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