Park Sun-hyuk, Writer: "Mandatory Implementation of a No-Borrow Short Selling Blocking System"
As a practical measure to block illegal short selling, an opinion emerged that the most reasonable approach is to establish a computerized system in which short sellers manage their own available sellable balances. On the other hand, Park Soon-hyuk, a writer representing individual investors, argued that measures to fundamentally block naked short selling through platforms such as 'TrueWeb' should be considered.
On the 27th, the Korea Exchange and related securities institutions, writer Park Soon-hyuk, market participants, and others held a 'Computerization Forum for Preventing Illegal Short Selling' at the Korea Exchange building in Yeouido, Seoul. Panelists representing individual investors included writer Park Soon-hyuk, Jung Ui-jung, president of the Korea Stock Investors Association (Hantuyon), Kim Deuk-ui, president of the Financial Justice Solidarity, and Kim Dae-jong, professor of the Department of Business Administration at Sejong University.
Song Ki-myung, head of the Stock Market Department at the Korea Exchange's KOSPI Market Headquarters, stated, "Only when the balance can be accurately identified can illegal short selling orders be blocked, and only investors themselves can know their balances precisely." He added, "Since investors can know their sellable balances in real time with accuracy, including trading transaction details and borrowed stock status, it is most practical to mandate a balance management system and require securities firms receiving orders to verify whether such systems are established and whether internal control systems are in place."
Regarding concerns about the inability to detect if investors intentionally manipulate data, he explained, "Post-trade short selling audits are continuously conducted, and the exchange will detect violations retrospectively. Securities firms will be obligated to verify at least once a year whether institutional systems are appropriate."
He continued, "If securities firms neglect their duty to verify the establishment of institutional fund management systems, fines will be imposed," emphasizing, "Penalties will be strengthened for both investors and securities firms to ensure compliance with regulations, and authorities will continuously monitor whether the systems operate properly through post-inspections."
Writer Park Soon-hyuk, who participated as a panelist, argued that securities firms should introduce 'TrueWeb,' one of the systems capable of detecting naked short selling. Park said, "It is the responsibility of securities firms to filter whether a short selling order is naked or covered," adding, "Securities firms should be mandated to have systems that filter orders related to naked short selling."
He continued, "Hana Securities, a leading securities firm applying TrueWeb, is currently filtering naked short selling," emphasizing, "The Financial Services Commission should mandate securities firms to adopt this system."
In response, Hong Moon-yu, head of the Financial Investment Products Department at Koscom, said, "To prevent lending short selling, all aspects such as short selling balance management, securities lending brokerage contract details, and rights details must be managed organically, and it is difficult to prevent short selling with TrueWeb alone." He added, "While on-exchange trading is a time-sensitive system, the confirmation of securities lending brokerage contracts cannot be known within seconds, making it difficult to link the securities lending brokerage system with the on-exchange trading system."
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