Short-selling ban meant for fairness, market upgrade: regulator

▲ Kim Joo-hyun (R), head of the Financial Services Commission (FSC), and Lee Bok-hyun, chief of the Financial Supervisory Service, hold a joint press conference at the government complex in Seoul on Nov. 5, 2023, to announce the FSC will temporarily ban stock short selling until the second half of next year, amid efforts to crack down on illegal short selling by global investment banks. (Yonhap)

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Short-selling ban meant for fairness, market upgrade: regulator

SEOUL, Dec. 1 (Yonhap) -- South Korea's financial regulator said Friday that its recent measures to ban stock short selling are aimed at boosting fairness and upgrading the market system.

Early last month, the Financial Services Commission (FSC) announced that it will temporarily ban stock short selling until the second half of next year, amid efforts to crack down on illegal short selling by global investment banks (IBs).

In a meeting with foreign correspondents, Kim So-young, vice chairman of the FSC, said that the regulator had found that some investors have been involved in illegal short-selling practices, which undermines fair price formation and credibility in the Korean market.

The regulator earlier unveiled a plan to form a special task force to inspect all global IBs for illegal short selling.

The move came after the financial watchdog exposed two Hong Kong-based IBs suspected of short selling 56 billion won (US$42.7 million) worth of stocks while being aware that they would not be able to borrow the shares sold.

Some market observers are expressing concerns about the short-selling ban complicating the country's bid to gain developed market status from Morgan Stanley Capital International (MSCI) Inc.

The MSCI reclassifies its watch list of emerging markets and developed markets based on the countries' economic development and size and liquidity of equity markets, as well as market accessibility for foreign investors.

This year, South Korea failed to win developed market status and has stayed on the emerging market list though it proposed a set of reform measures.

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