On Mar. 6, 2025, SK FSC said legal revisions to improve the short selling system were completed with approval of revisions to Regulations on financial investment business.
Plus, revisions to KRX's Market surveillance regulations, during its meeting on Mar. 5.
SK FSC will verify the computer system until the effective date, i.e. Mar. 31, 2025.
Temporarily expand the system for designating overheated short selling stocks, in order to buffer the volatility of stocks that may occur when short selling resumes.
SK FSC said revisions to the Capital markets act to improve the short selling system have been approved on Sep. 26, 2024 at the National Assembly's plenary session.
Follows SK FSC Jun. 2024 launched short sale reform measures, see #215738.
Also follows SK FSS Jun. 2024 proposed short sale guidelines, checklist, see #215751.
Follows SK FSS Sep. 2024 published integrated short sale guidelines, see #227374.
Key Revisions
Institutional and corporate investors who intend to engage in short sale transactions shall establish electronic short sale processing systems and internal control standards.
Securities houses shall verify whether investors have fulfilled these legal obligations.
Failure to comply with these legal obligations may result in a fine for negligence of maximum KRW 100mn even when there is no occurrence of naked short sale activity.
Details re measures intended to prevent naked short sales and their scope of application will be specified in the Enforcement decree, which will be based on the previously announced short sale reform plan and the guidelines prepared by SK FSS.
Stock repayment period for institutional investors will be restricted to max. 12 months with 90-day extension each time to make short sale transaction conditions equal for retail and institutional investors; non-compliance subject to fine of max. KRW 100mn.
Up to 5-year ban on trading financial investment products, being appointed/serving as executive at listed companies, will be introduced for unfair trading, illegal short sale.
Payment freeze of 6 months with an extra six-month extension on accounts suspected for being used in unfair trading and/or illegal short sales will also be introduced.
Severity of monetary penalties imposed on unfair trading/illegal short sale will be increased from current 3-5 times the amount of unfairly gained profits to 4-6 times.
Illegal short sale will also be subject to aggravated penalties for imprisonment.
Short sellers will be banned from acquiring convertible bonds (CBs) or bonds with warrants (BWs), where they engaged in short sale of stocks after a company disclosed its CB or BW issuance plan but prior to the announcement of its issue price.
Next Steps
Revised act will be effective from Mar. 31, 2025 but restrictions on trading, executive appointment, and payment suspension will take effect 6 months after promulgation.
Revisions to Enforcement decree and regulations, aimed at strengthening disclosure of short selling balances and lowering short selling collateral ratio of individual investors to the level of institutional investors, will be completed in Oct. 2024.
Oct. 7, 2024 SK GVT Update
On Oct. 7, 2024, SK GVT stated that the bill on the short selling system would be presented to the Cabinet meeting on Oct. 10 and Oct. 15, 2024, before promulgation.
In addition, SK GVT said childcare, unpaid wage bills will be presented, see #228902.
Oct. 15, 2024 SK GVT Update
On Oct. 15, 2024, SK GVT said the short selling system bill will be presented to the Cabinet meeting on Oct. 15, 2024; once approved, it will be valid from Mar. 31, 2025.
On Mar. 6, 2025, SK FSC said legal revisions to improve the short selling system were completed with approval of revisions to Regulations on financial investment business.
Plus, revisions to KRX's Market surveillance regulations, during its meeting on Mar. 5.
SK FSC will verify the computer system until the effective date, i.e. Mar. 31, 2025.
Temporarily expand the system for designating overheated short selling stocks, in order to buffer the volatility of stocks that may occur when short selling resumes.
Regulators
SK FSC; SK GVT
Entity Types
B/D; Exch; Inv Co
Reference
PR 3/6/2025; Dec, Mt, 3/5/2025; PR, Trsl, 11/5/2024; PR 10/15/2024; PR 10/7/2024; PR, Trsl, 9/27/2024; Dec 9/26/2024; Dec 34840, 8/13/2024; Law 20305, 2/13/2024;
