Lee Bok-hyun "Resumption of Short Selling? System Setup Likely Possible in Q1 Next Year"

"At least 10 months just to implement the computer system"

Lee Bok-hyun, Governor of the Financial Supervisory Service, addressed criticisms that he was out of sync with the Presidential Office regarding the resumption of short selling, stating, "There has been no change in the policy to resume short selling only after establishing the short selling electronic system," and explained, "This means that it is necessary to refine the method, scope, and conditions for resuming short selling by June." He further predicted that the resumption of short selling would be "practically possible around the first quarter of next year."

On the 27th, during MBC Radio's 'Kim Jong-bae's Focus,' Governor Lee explained the background of the controversy over the timing of the short selling resumption, which had not been agreed upon with the government, saying, "Before the end of June, we will provide the public with a detailed explanation of the preparations we have made since last November and gather opinions on possible options, after which a final decision will be made within the government." He emphasized that the government's consistent position is that short selling cannot resume until the electronic system to prevent illegal short selling is in place, and that decisions will be made through collecting opinions on the resumption methods and conditions.

Lee Bok-hyun, Governor of the Financial Supervisory Service. [Photo by Yonhap News]

Governor Lee had previously stated after the 'Invest K-Finance' investment briefing held in New York, USA, on the 16th, "Personally, I hope to resume at least some short selling in June, but if there are technical shortcomings, we will announce a predictable resumption timeline." He also said, "Even if there are technical and institutional shortcomings related to the June resumption, it is necessary to communicate with the market that we are pursuing resumption within a certain time frame after hearing stakeholders' opinions."

This led to confusion among individual investors, who interpreted this as an intention to resume the previously fully banned short selling by the end of June. Subsequently, on the 22nd, the Presidential Office drew a line on the resumption of short selling by stating that "Governor Lee's remarks were personal hopes," which sparked criticism that the Financial Supervisory Service and government policy were out of sync.

Regarding the remarks by Jung Eun-bo, Chairman of the Korea Exchange, that building an electronic system to detect and block illegal short selling could take at least 10 months, Governor Lee explained, "Since the ban on short selling, discussions have been held to create a system that can detect illegal activities to the maximum extent possible within feasible limits," and added, "Since last month, we have been tapping the market with a concrete plan for the electronic system."

Governor Lee added, "Among various options, a near-final plan has been decided considering costs and stakeholder opinions, but it will take at least 10 months to build and implement this system," and continued, "The electronic system includes a central system and an illegal detection system within short selling order companies, and considering all this, practically, the resumption of short selling seems possible around the first quarter of next year."