The Korea Exchange (KRX), ahead of the resumption of short selling on the 31st, publicly demonstrated a new computerized system capable of detecting and blocking problematic naked short selling from the past.
On the morning of the 19th, the Exchange held a 'Short Selling Computerized System Construction Demonstration' at its Yeouido headquarters, attended by officials from the Financial Supervisory Service, the Korea Financial Investment Association, major securities firms, and global investment banks (IBs). This event was held to reveal the progress of the computerized system development ahead of the short selling resumption at the end of this month and to alleviate market concerns.
During the event, the Exchange demonstrated the Short Selling Central Inspection System (NSDS), which cross-checks trading information and balance data based on institutional investors' balance reports. This showed how the process of detecting actual naked short selling is conducted.
The disclosed institutional investor balance management system is characterized by its ability to determine in real-time whether the sellable balance is exceeded, thereby preemptively blocking naked short selling. Additionally, the Exchange's NSDS is built to verify all types of sell orders through an independent balance calculation function, enabling the detection of illegal short selling. Both systems will undergo final checks in a simulated market until the 26th.
Financial authorities and the Exchange expect that the new computerized system will enhance market trust in short selling and contribute to resolving the so-called 'Korea Discount' (domestic stock market undervaluation).
Lee Bok-hyun, Governor of the Financial Supervisory Service, emphasized, "The computerization of short selling will greatly contribute to restoring trust in our capital market," adding, "We will do our best to advance into a global leading market by protecting shareholder interests and improving foreign investors' accessibility." Jung Eun-bo, Chairman of the Exchange, said, "This demonstration will be a meaningful occasion to dispel concerns surrounding illegal short selling," and added, "As a market manager, we will do our utmost to restore investor confidence and ensure stable market operation through precise market surveillance."
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