SEOUL (Reuters) – South Korea will fully lift a short-selling ban in the domestic stock market from March 31 for the first time in five years, the financial regulator said on Friday.
“With recent improvements and policy efforts, it is expected that concerns about short-selling trades undermining fair pricing in the market will be resolved,” the Financial Services Commission (FSC) said in a statement.
Since re-imposing a sudden market-wide ban in November 2023 to root out illegal trades, authorities have launched an investigation into short-selling trades by foreign banks and developed a new system to detect such practices.
Authorities have also brought in regulatory changes intended to promote a “level playing field” between retail and institutional investors.
In South Korea, naked short-selling of stocks, or selling stocks without borrowing them first or determining they can be borrowed, is banned by the Capital Markets Act.
From March 31, short-selling of stocks will be allowed for institutional investors if they have adopted the new system and prepared measures for internal control, the FSC said.
During the first two months, temporary measures will be implemented to prevent certain stocks from experiencing excessive volatility, while authorities also strengthen their market-monitoring activity.
South Korea is fully lifting the ban on short-selling of stocks for the first time since March 2020, when it was introduced due to a global financial market rout triggered by the COVID-19 pandemic.
The ban has been partially lifted, re-imposed and extended since then, raising criticism, especially among foreign investors, over regulatory uncertainty.
(Reporting by Jihoon Lee; Editing by Ed Davies)
