Korea Exchange Completes Development of Central Short Selling Inspection System

Testing with Major Institutional Investors to Begin from the 6th

The Korea Exchange announced on the 5th that it has completed the development of the Short Selling Central Inspection System (NSDS), which allows for continuous monitoring of short selling transaction details by institutional investors to prevent illegal short selling, and will begin linkage testing with major institutional investors who have established balance management systems starting from the 6th.

Following the government's announcement of short selling system improvement measures on June 13 last year, the Korea Exchange began developing the NSDS in July. After six months of system design, development, implementation, and internal testing, linkage testing with the balance management systems established by institutional investors will commence on the 6th.

About 30 major domestic and foreign institutional investors (accounting for over 90% of short selling transaction volume) are expected to participate in this linkage test, focusing on interface connection with the NSDS and data consistency checks until February.

The basic structure of the NSDS is a system that detects illegal short selling by reconciling the balances and changes reported by institutional investors to the Korea Exchange with transaction details and balances from the Korea Exchange and NextTrade (ATS).

After completing the linkage test, the Exchange plans to operate a simulated market for participating institutional investors starting in March, aiming to ensure system stability before the mandatory implementation of the short selling electronic system at the end of March.

While promoting the development of the NSDS, the Exchange held four briefing sessions for domestic and foreign institutional investors to share development progress, provide guidance on reporting content and methods, and support the smooth establishment of the short selling electronic system. Additionally, a detailed manual called the 'NSDS Guidebook' will be prepared and distributed in January to assist with NSDS balance reporting.

An Exchange official stated, "We expect that the establishment of the short selling electronic system will prevent naked short selling transactions and enhance market trust in short selling."