FSC Decides to Ban Stock Short Selling Until June 2024 and Seek Measures to Improve the System

The FSC) announced a ban on all stock short selling in domestic markets from 6 November 2023, until the end of June 2024. This decision was made due to the high interest rate environment, stagnant growth in the global economy, and geopolitical risks, which have led to increased uncertainties for the Korean economy. The FSC also expressed concerns about the fair pricing function of domestic stock markets, as they have discovered illegal naked short selling practices conducted by foreign and institutional investors. The FSC believes that these illegal activities can erode the fair pricing function of the market and degrade confidence in the market.
During the ban on short selling, the government plans to work on proactive measures to improve the system and root out illegal short selling activities. One area of focus is to level the playing field between institutional and retail investors. Although measures have been introduced to address the disparate conditions for borrowing stocks, the playing field remains unbalanced, and the authorities will actively seek measures to address this issue.
The authorities also intend to find alternative ways to prevent naked short selling before it occurs. They will analyze recent illegal short selling cases and seek input from market experts and stakeholders to explore various prevention methods. If necessary, they will seek legislation through close cooperation with the National Assembly.
Efforts to detect and punish naked short selling activities will be stepped up. A special short selling investigation unit will be launched to thoroughly investigate this sector. The authorities will strictly punish any additional illegal activities and seek cooperation with the National Assembly to strengthen penalties and diversify sanctions measures.
While the short selling ban is in place, the government will work on improving the short selling system through consultation with market experts and relevant institutions. Details about these improvement measures will be open to public discourse, and the authorities will actively participate in the legislation process at the National Assembly.
FSC Chairman Kim Joo-hyun emphasized that the government’s capital market policy aims to create a fair and efficient market to protect investors and ensure confidence. The government is committed to bringing improvements to the country’s short selling system to instill confidence in every investor.