Son Byung-du "Will Strengthen Illegal Short Selling Detection System... No to Shortening Settlement Cycle"

Holding Back on Mentioning Short Selling Resumption Timing... Mixed Views with Concerns Over Expansion of Individual Short Selling
"Will Foster Healthy Competition with Alternative Exchanges"

Son Byung-du, Chairman of the Korea Exchange, is holding a New Year's press conference through a YouTube live broadcast on the 26th. (Photo by Korea Exchange)

[Asia Economy Reporter Minwoo Lee] Sohn Byung-doo, Chairman of the Korea Exchange, emphasized strengthening pre-inspection and post-management of short selling and establishing a system to detect various illegal activities. He stated his intention to improve unreasonable systems by gathering market opinions.

Chairman Sohn expressed this position at a New Year's press conference held on the 26th via YouTube live broadcast. He said, "With the revision of the Capital Markets Act at the end of last year, illegal short selling can result in imprisonment for more than one year, and short selling entities cannot participate in paid-in capital increases, among other improvements. We are working to ensure these systems take root by shortening the suspicious transaction inspection cycle to one month, securing related personnel, and developing new detection techniques to strengthen short selling monitoring," he emphasized.

However, he was reserved regarding the timing of the resumption of short selling, stating that it is a matter for the Financial Services Commission to decide and not appropriate for the Exchange to comment on.

He also expressed concerns about the expansion of short selling participation by individual investors. Chairman Sohn explained, "Earlier, Financial Services Commission Chairman Eun Sung-soo expressed concerns about expanding short selling to individual investors, likely warning that if the short selling market is indiscriminately opened to individuals, their creditworthiness, information capability, and risk tolerance are low. The Exchange is also aware of the risks that arise if opportunities for short selling are indiscriminately expanded to individual investors, so we will approach this cautiously," he explained.

Regarding the plan to shorten the short selling settlement cycle to T+1, like China, he drew a line. Chairman Sohn said, "Changing the settlement cycle requires changing the operational systems of many capital market participants, including domestic and foreign investors, securities firms, asset management companies, custodians, trust service companies, and related institutions, so caution is necessary. Since most countries choose 'T+3' for settlement safety, I do not think we should follow China just because it operates on T+1," he said.

Meanwhile, he expressed a positive stance on the introduction of Alternative Trading Systems (ATS). He viewed it as a direction where both the Korea Exchange and ATS can develop through healthy competition. Chairman Sohn said, "Recently, trading volume has surged, and there are movements to establish ATS by consortia such as the Korea Financial Investment Association and IT specialized companies. If ATS is activated, a sound competitive environment among trading platforms will be created," and added, "The Korea Exchange plans to closely consult with ATS to ensure market surveillance and service stability."