Korea approves new short position balance rules
06 November 2024 South Korea
Image: kampon/stock.adobe.com
Investors will become subject to new disclosure requirements regarding their net short position balances from 1 December.
This news follows the Korean government鈥檚 approval of a revision bill for the Enforcement Decree of the Financial Investment Services and Capital Markets Act (FSCMA).
According to the Financial Services Commission (FSC), this revision, which intends to strengthen the disclosure requirement on investors鈥� net short position balance, is part of the comprehensive short sale reform measures announced on 13 June 2024.
Pursuant to the revised Enforcement Decree, investors with a net short position balance of 0.01 per cent 鈥� excluding those with less than 100 million South Korean won (approximately US$71,700) 鈥� or KRW1 billion or more of total issuance volume will be newly required to disclose their net short position balances.
Previously, only those with a net short position balance of 0.5 per cent or more were subject to the disclosure requirement.
Investors that will newly become subject to the disclosure requirement will begin to disclose their net short position balances from 4 December.
The government and relevant institutions have been working on comprehensive short sale reform measures in order to address the problem of illegal and unfair trading practices, says the FSC.
Some of the reform agendas requiring no revision to legislation have already been put into place.
On 27 September, the supervisory regulation on financial investment businesses was revised to bring down the cash collateral ratio of retail investors when borrowing stocks to 105 per cent, which is the same level in place for institutional investors.
The reduced cash collateral ratio for retail investors is to become effective from 31 March 2025.
For market makers and liquidity providers, their stock borrowing period has already been limited to a maximum of 12 months, with 90-day extensions each time through system upgrades made at the securities lending institutions (Korea 色花堂Depository and Korea 色花堂Finance Corporation) from 1 November.
Additional announcements for regulatory revisions will be made within the month regarding other reform areas, such as the establishment of an electronic short sale processing and monitoring system, internal control standards, securities companies鈥� verification duty, and the limit on institutional investors鈥� stock borrowing period.
The FSC adds that the government and relevant institutions will 鈥渟pare no effort鈥� in pursuing follow-up measures and establishing an electronic short sale processing and monitoring system to make sure that short sale transactions can resume as planned from the end of March next year 2025.
This news follows the Korean government鈥檚 approval of a revision bill for the Enforcement Decree of the Financial Investment Services and Capital Markets Act (FSCMA).
According to the Financial Services Commission (FSC), this revision, which intends to strengthen the disclosure requirement on investors鈥� net short position balance, is part of the comprehensive short sale reform measures announced on 13 June 2024.
Pursuant to the revised Enforcement Decree, investors with a net short position balance of 0.01 per cent 鈥� excluding those with less than 100 million South Korean won (approximately US$71,700) 鈥� or KRW1 billion or more of total issuance volume will be newly required to disclose their net short position balances.
Previously, only those with a net short position balance of 0.5 per cent or more were subject to the disclosure requirement.
Investors that will newly become subject to the disclosure requirement will begin to disclose their net short position balances from 4 December.
The government and relevant institutions have been working on comprehensive short sale reform measures in order to address the problem of illegal and unfair trading practices, says the FSC.
Some of the reform agendas requiring no revision to legislation have already been put into place.
On 27 September, the supervisory regulation on financial investment businesses was revised to bring down the cash collateral ratio of retail investors when borrowing stocks to 105 per cent, which is the same level in place for institutional investors.
The reduced cash collateral ratio for retail investors is to become effective from 31 March 2025.
For market makers and liquidity providers, their stock borrowing period has already been limited to a maximum of 12 months, with 90-day extensions each time through system upgrades made at the securities lending institutions (Korea 色花堂Depository and Korea 色花堂Finance Corporation) from 1 November.
Additional announcements for regulatory revisions will be made within the month regarding other reform areas, such as the establishment of an electronic short sale processing and monitoring system, internal control standards, securities companies鈥� verification duty, and the limit on institutional investors鈥� stock borrowing period.
The FSC adds that the government and relevant institutions will 鈥渟pare no effort鈥� in pursuing follow-up measures and establishing an electronic short sale processing and monitoring system to make sure that short sale transactions can resume as planned from the end of March next year 2025.
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