Mention of Establishing a Computerized Short Selling System
Need for Communication with the Market on Resumption Direction
The Financial Supervisory Service (FSS) will hold a forum next month to discuss improvements to the short-selling system and will once again meet with individual investors. This will be the third forum, following the first one held in March regarding short-selling system improvements and the second one last month. It is expected that the forum will focus on communication efforts to prevent the departure of foreign investors, including discussions on the direction of resuming short-selling.
According to industry sources on the 31st, the FSS will hold the '3rd Short-Selling System Improvement Forum' on the 10th of next month. FSS Governor Lee Bok-hyun will attend to share the schedule for building the IT system and gather investors' opinions.
The forum is expected to concentrate on communication regarding the direction of resuming short-selling. Recently, foreign investors have indirectly conveyed to financial authorities their concerns that the prolonged ban on short-selling could lead them to liquidate their domestic positions.
A senior official from the financial authorities stated, "Foreign investors are expecting short-selling to resume within this year, but if the ban period extends longer than anticipated, foreign investors may exit the domestic stock market. It is important to communicate well with the market about the direction of resuming short-selling at the very least."
However, there is also a view that Governor Lee may find it difficult to specify the timing of the short-selling resumption. Earlier, after the 'Invest K-Finance' investor relations (IR) event held in New York, Governor Lee told reporters, "My personal desire or plan is to partially resume short-selling in June," adding, "Even if there are technical or institutional shortcomings related to the June resumption, it is necessary to communicate with the market that we are considering a timeline for resumption after hearing stakeholders' opinions."
Nonetheless, a senior official from the Presidential Office dismissed the possibility of a June resumption, saying, "The FSS Governor's remarks seemed to be personal hopes expressed during the process of gathering stakeholders' opinions, at least to my recollection." The official made it clear that short-selling will not resume until an illegal short-selling prevention system is established.
Previously, at the first forum, the FSS collected concerns raised by individual investors about high-frequency trading (HFT) issues and suspicions of market disruption by liquidity providers (LPs), and initiated related investigations. At the second forum held last month, the FSS explained plans to build an IT system to block illegal short-selling.
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