KSD Completes Establishment of Short Selling Management System

Short Selling Borrowing Transactions Limited to a Maximum of 12 Months

The related system for restricting the repayment period of securities lending transactions for short selling purposes, which will be enforced from the end of March next year, has been completed.

The Korea Securities Depository announced on the 4th that it has established business regulations and completed system development for the 'repayment period restriction of securities lending transactions for short selling purposes' in cooperation with Korea Securities Finance Corporation. The Korea Financial Investment Association also revised the model regulations to limit the repayment period when securities firms mediate securities lending transactions for short selling purposes. This is a measure following the amendment to the Capital Markets Act passed by the National Assembly plenary session on the 26th of last month.

The amendment provides a legal basis for restricting the repayment period of securities lending transactions for short selling purposes. Accordingly, going forward, the repayment period of securities lending transactions can be managed within a maximum of 12 months for Market Makers and Liquidity Providers. The extension is done in 90-day increments and will be enforced from March 31 next year.

The Korea Securities Depository and Korea Securities Finance Corporation completed the development of an internal system for differentiated management of repayment periods by transaction purpose as of the end of last month. They are currently conducting tests for system linkage with major participants. From November, Market Makers and Liquidity Providers must indicate the transaction purpose when conducting securities lending transactions for short selling.

Korea Securities Finance Corporation has completed related revisions to restrict the repayment period of lending transactions for individual investors. Once the Korea Financial Investment Association completes its revisions within this month, both the repayment periods for securities lending transactions for short selling purposes and lending transactions will be extended to a maximum of 12 months. Securities firms providing brokerage services are expected to complete system construction by the end of March next year.