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Dec 04, 2024
- FSC Holds Market Monitoring Meeting (Dec. 4)
- Chairman Kim Byoung Hwan of the Financial Services Commission convened a meeting on December 4 with officials from related authorities, financial institutions, and industry groups to check market situations and discuss response measures. The following is a summary of Chairman Kims opening remarks. A Summary of Chairmans Remarks Currently, the situation surrounding the foreign exchange market and overseas-listed stocks of Korean companies appear to be stabilizing. However, as there are concerns about a potential rise in volatility, financial authorities will utilize all available measures to prevent the spread of market anxiety and ensure a seamless and stable operation of financial markets in close coordination with policy financial institutions, related organizations, and industry groups. At the Emergency Meeting on Macroeconomic and Financial Issues (F4 Meeting) held earlier this morning, authorities decided to ensure the supply of unlimited liquidity support until the conditions return to normal in the financial markets. The measures include stock market stabilization fund in the amount of KRW10 trillion, bond market stabilization fund in the amount of KRW40 trillion, and the corporate bond and commercial paper (CP) purchase program all aimed ensuring market stability. At the same time, authorities will closely monitor financial companies foreign currency liquidity conditions to ensure their soundness, while supplying foreign currency liquidity through the Korea Securities Finance Corporation to prevent the risk of margin call emanating from a potential weakening of the Korean won. In responding to market situations, each organization is asked to strictly follow its own contingency plan. In this regard, policy financial institutions are asked to mobilize all available resources to ensure an active and flexible supply of funds to make sure that vulnerable groups, small merchants, and businesses face no challenges in meeting their financing needs. The stock market
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Sep 26, 2024
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Aug 27, 2024
- 2024 Korea Fintech Week Kicks Off on August 27
- 2024 Korea Fintech Week kicks off on August 27 with major fintech businesses, financial companies, related organizations, academic institutions, and foreign governments and organizations at Dongdaemun Design Plaza (DDP) in Seoul. The expo will be held for three days between August 27 to 29 under the theme of Beyond Boundaries: Fintech and AI Redefining Finance, providing opportunities to lure investment and share updates on the newest fintech and AI technologies and trends. 85 exhibition booths and 109 businesses and associations will participate to promote innovative technologies and attract investments Chairman Kim Byoung Hwan of the Financial Services Commission delivered welcoming remarks in which he emphasized the importance of AI as a game changer for industries and society, and how we harness AI will determine the competitiveness of individuals and companies in the future. Chairman Kim vowed to support the finance industry so that it could play a leading role in propelling Korea into the top three nations in AI sector. Chairman Kim outlined four key directions for digital finance policies aimed at facilitating fintech and the digital transformation (DX) of the financial sector. First, he emphasized the need to revisit financial regulations established in the analog era to accelerate the digital transformation of finance. This will involve rationalizing entry and conduct regulations for financial companies, as well as standards for information processing, such as cloud usage. Second, Chairman Kim highlighted the importance of strengthening collaboration between fintech companies and financial companies. To this end, the regulations on financial institutions investments in fintech businesses will be re-evaluated, and discussions will begin on reforming the regulatory framework governing outsourcing agreements, as well as improving the electronic financial systems, to allow the emergence of diverse business models in the era of big blur. Third, Chairman Kim anno
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Jul 25, 2024
- 2024 Korea Fintech Week to Kick Off on August 27
- The Financial Services Commission announced that this years global fintech expo, 2024 Korea Fintech Week, is scheduled to kick off on August 27 with major fintech businesses, financial companies, related organizations, academic institutions, and foreign governments and organizations participating at Dongdaemun Design Plaza (DDP) in Seoul. This years global fintech expo, the largest ever in scale, will be held for three days between August 27 and 29 under the theme of Beyond Boundaries: Fintech and AI Redefining Finance, providing visitors and participants with opportunities to share global trends on artificial intelligence (AI) and fintech innovation and gain insights on financial industrys future ecosystem. After an opening ceremony, there will be a policy information session provided by the FSC on Koreas fintech policy direction for this year and an on-site QA session with officials. Visitors will have chances to participate in eleven different seminars throughout three days, dealing with topics, such as AI and fintech, fintech investment strategy, ESG, and so on, with specific focus on AI technologies and their application. In addition, there will be ample opportunities to attract investments through investor relations (IR) and reverse IR events, which will help to promote investments for fintech firms to scale up or expand their businesses overseas. There will be a total of 85 exhibition booths organized into four different exhibition hallsfintech hall, financial hall, cooperating organization hall, and global hallshowcasing latest fintech services embracing AI technologies. During the three-day period, various consulting and networking programs will also be made available for fintech startups, entrepreneurs, and young adults seeking career opportunities in fintech. Visitors can attend and tour at free of charge. For more information please visit official expo website (https://2024.fintechweek.or.kr/). * Please refer to the attached PDF for details.
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Jul 22, 2024
- Vice Chairman Visits London to Promote Capital Market Reform Programs and Strengthen Bilateral Cooperation
- Vice Chairman Kim Soyoung of the Financial Services Commission visited London, the United Kingdom (UK) from July 16 to 19 in an effort to promote Koreas capital market reform and corporate value-up programs to global investors and to strengthen financial cooperation between Korea and the UK. IR with Global Investors On July 17, Vice Chairman Kim held an investor relations event for global investors and provided key information about the progress of Koreas capital market reform initiatives aimed at boosting market accessibility, guaranteeing fairness and transparency in market transactions, and enhancing shareholder values. In this regard, Vice Chairman Kim provided detailed information about the opening up of the foreign exchange (FX) market, plans to introduce an alternative trading system (ATS), short sale reform measures, and the corporate value-up program. UK-Korea Financial Forum On July 17, Vice Chairman Kim also attended the UK-Korea Financial Forum and delivered a congratulatory speech. In his remarks, Vice Chairman Kim talked about the importance of maintaining strong cooperation with the UK to effectively respond to various challenges and opportunities presented by shifting global market environment, such as technological advance and climate change. Meeting with Lord Mayor of the City of London On July 18, Vice Chairman Kim held a meeting with Lord Mayor Michael Mainelli of the City of London and exchanged views on key issues surrounding major elections around the world this year and policies to promote global financial hubs in both countries. At the meeting, Vice Chairman Kim took time to explain Koreas key financial policies, such as open banking, establishing a loan transfer infrastructure to facilitate refinancing of personal loans at lower interest rates, introducing financial MyData service, adopting guidelines on ESG disclosure, and so on. Meeting with FTSE Russell Following the meeting with the Lord Mayor of the City of London, Vice Chairman Kim vi
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Jul 09, 2024
- Insider Transactions of Listed Companies Subject to the Prior Disclosure Requirement from July 24
- The Financial Services Commission announced that regulatory changes, which require insider transactions of listed companies to be disclosed 30 days prior to their planned transaction dates, have been approved by the government at a cabinet meeting held on July 9. The revision proposal for the Enforcement Decree of the Financial Investment Services and Capital Markets Act (FSCMA) and its subordinate regulations will go into effect from July 24. The rule changes being introduced specify (a) the entities that will be exempted from the prior disclosure duty, (b) the volume and type of transactions exempted from the disclosure duty, (c) details regarding the procedure and method of disclosure, (d) specific reasons or cases where insider transactions plan can be withdrawn, and (e) a clearer method for calculating penalty surcharges that can be imposed on rule-breakers. First, the rule changes being introduced exempt pension funds and other financial investors that are expected to have higher levels of internal control standards and are unlikely to misuse material nonpublic informationsuch as collective investment vehicles, banks, insurance companies, specialized credit finance companies, financial investment businesses, venture capital firms, and the Korea SMEs and Startups Agencyfrom the duty to disclose their stock transaction plans in advance for insider transactions. Moreover, an exemption from the prior disclosure duty will also be granted to foreign investors that are deemed to have an equivalent status to the above mentioned domestic financial investors to ensure more equal treatment of both domestic and foreign investors. Second, the rule changes being introduced grant an exemption if the volume of transactions in particular securities typesover the past six months is less than one percent of the total number of shares issued by the company within that particular year and if the total amount of transactions is less than KRW5 billion. Moreover, an exemption from th
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Jul 03, 2024
- SFC Imposes Penalty Surcharges on Global Investment Banks for Violating Short Sale Regulations
- The Securities and Futures Commission, a sub-commission within the Financial Services Commission responsible for overseeing the securities and futures markets, held the thirteenth regular meeting on July 3 and decided to impose penalty surcharges amounting to KRW27.173 billion in total on two former Credit Suisse affiliated investment banks for violating short sale regulations under the Financial Investment Services and Capital Markets Act (FSCMA). The level of penalty surcharge imposed on each of the two former Credit Suisse affiliated entities is the largest (KRW16.94 billion on Credit Suisse AG) and the third largest (KRW10.23 billion on Credit Suisse Singapore Ltd.) ever since the penalty surcharge system began to be implemented on naked short sale activities in April 2021. In the case of Credit Suisse AG (currently UBS AG), from April 7, 2021 to June 9, 2022, the investment bank was found to have engaged in naked short sales in the amount of about KRW60.33 billion (162,365 shares on 20 stock items) without possessing these stocks at the time of placing short sale orders. In the case of Credit Suisse Singapore Ltd., from November 29, 2021 to June 9, 2022, the investment bank was found to have engaged in naked short sales in the amount of about KRW35.28 billion (401,195 shares on five stock items) without possessing these stocks at the time of placing short sale orders. In addition, prior to todays meeting, the SFC decided to impose administrative fines worth KRW284.2 million in total on four domestic financial investment businesses, two foreign financial investment businesses, and an individual investor for violating their net short position balance reporting and disclosure duties under the FSCMA. The financial authorities will continue to strictly deal with naked short selling and other unfair trading activities in capital market to promote soundness in market transactions. * Please refer to the attached PDF for details.
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Jun 21, 2024
- Market Access Improved for Foreign Investors with Abolishment of Investment Registration Certificates
- The Financial Services Commission announced that foreign investors access to Korean capital market has been improved with the abolishment of foreign investors prior registration requirement from December 14, 2023. As it has been repeatedly pointed out in the past that this prior registration requirement was standing in the way of foreign investors access to Korean capital market, the FSC decided to abolish the registration requirement (IRC: Investment Registration Certificate)which had been in place for about 30 years since 1992through a revision of the Financial Investment Services and Capital Markets Act (FSCMA) in December last year. As a result, without first having to register with the Financial Supervisory Service (FSS), foreign investors are now able to use either legal entity identifiers (LEIs, for corporate investors) or passport numbers (for individual investors) to open their investment accounts at financial companies and make investments in domestically listed securities. After monitoring the trend in new account opening, the authorities found that during the six-month period after the abolishment of the prior registration requirement (between December 15, 2023 and June 12, 2024), there were 1,432 new investment accounts opened by foreign investors using either LEIs or passports. Among them, there were 1,216 corporate entities and 216 individual investors with new accounts opened at 36 securities firms and banks. In particular, from March this year, the number of new account opening by foreigners has grown to about 300 to 400 every month. Considering that the average monthly IRC issuance was 105 in the year of 2023, the abolishment of the prior registration requirement appears to be contributing to the enhancement of market access for foreign investors. In this regard, FSC Vice Chairman Kim Soyoung stated that the abolishment of the prior registration requirement has made it more convenient for foreign investors to open an account, and so consequently, t
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Jun 13, 2024
- Short Sale Reform Measures Introduced to Prevent Illegal Trading Activities and Protect Investors
- The Financial Services Commission announced the finalized version of short sale reform measures on June 13, which include plans to establish a completely electronic short sale processing system until March 2025, limit the length of stock repayment period for both institutional investors and retail investors to maximum 12 months, and strengthen the severity of penalties on illegal short sale activities when the amount of unfairly gained profits is KRW5 billion or more. In November 2023, the FSC decided to ban short selling in domestic stock markets (until the end of June 2024), because authorities became concerned about naked short selling activities taking place routinely, which could potentially disrupt domestic stock markets fair pricing function. Since then, public debates and discussions have taken place to make improvements to the short selling system, and the ruling party and the government held a consultative meeting to announce the finalized set of reform measures on June 13. Background On November 16, 2023, the FSC introduced its plan to seek short sale reform measures at the meeting held with representatives from the private sector, the ruling party of the National Assembly, and related authorities. The issue of developing an electronic short sale processing system, which was discussed multiple times previously, has been thoroughly dealt with in taskforce meetings jointly led by the Financial Supervisory Service (FSS) and the Korea Exchange (KRX). After having active communication with market participants, including foreign investors, the authorities have come up with a set of practical measures for developing an electronic short sale processing system. In addition, the authorities have had a series of meetings and discussions with experts, industry representatives, and the public to collect wide-ranging opinions on the overall stock short sale system before arriving at this finalized set of reform measures. Meanwhile, the authorities have continued to mak
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May 02, 2024
- Guidelines on Corporate Value-up Plan Unveiled to Support Listed Companies' Voluntary Efforts to Boost Corporate Value
- The Financial Services Commission (FSC), the Korea Exchange (KRX), Korea Capital Market Institute (KCMI) and relevant organizations held the second seminar on the Corporate Value-up Support Plan on Thursday, May 2. At todays seminar, the draft Guidelines for Corporate Value-up Plan, one of key pillars of the Corporate Value-up Program, was unveiled to gather opinions from various stakeholders. Congratulatory Remarks by FSC Vice Chairman FSC Vice Chairman Soyoung Kim delivered congratulatory remarks reaffirming the governments strong will towards capital market reforms. In addition to regulatory reform initiativesin our capital markets that the government has made over the past two years, listed companies value enhancement efforts will help Koreas stock market tackle Korea discount and rise steadily over mid-to long-term, Vice Chairman said. Regarding the draft Guidelines on Corporate Value-up Plan unveiled today, Vice Chairman emphasized the importance of such plans, saying that corporate value-up plans will enable listed companies to communicate with shareholders and market participants about a comprehensive picture over the companies future, and allow investors to better understand companies in which they are going to invest in and make well-informed decision, thereby listed companies will be able to get proper market valuation for their true intrinsic value or expected value. He added that the corporate value-up program shall be deemed as a long-term initiative. In this regard, the guidelines unveiled today are not the end, but the beginning of our long-term plan, Vice Chairman said. Various incentives and support measures including guidelines, consulting, training, etc, will be provided to encourage active participation of listed companies, and then investors will properly evaluate companies value enhancement efforts and reflect them into their investment decision. The government and relevant organizations will continue to support companies corporate value-up ef
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Apr 02, 2024
- Future Finance Taskforce Kick-off Ceremony Takes Place
- The Financial Services Commission held a kick-off ceremony for future finance taskforce on April 2, together with relevant agencies, thinktanks, and academia. In accordance with the 2024 financial policy agendas, a taskforce on future finance has been organized with the aim of finding ways to tackle various challenges, such as climate crisis, population decline, and digital transformation. At the meeting, participants freely discussed about challenges and opportunities in the financial sector brought by demographic shift, climate change, and technological advancement. In his opening remarks, FSC Vice Chairman Kim Soyoung said that we are in the midst of mega trends, such as rapid change in population structure, climate change, and technological innovation. In this regard, Vice Chairman Kim said that these challenges constitute the known unknowns and that they demand systematic analysis and measured responses from both the public and private sectors. The future finance taskforce will be organized into three working groupspopulation, climate, and technology. First, the population working group aims to identify demographic factors that will have impact on the real economy and financial markets. It will also seek to explore ways to more effectively provide financial support measures to help young adults and newlyweds. Second, the climate working group aims to seek ways to reach the 2050 carbon neutral goal and enhance corporate climate adaptation capacity with a long-term perspective. It will also explore various ways to promote climate financing in low-carbon transition, renewable energy, and so on. Third, the technology working group aims to promote the use of advanced digital technology, such as blockchain and artificial intelligence, in financial services to boost user convenience and enhance the competitiveness of financial companies. It will also explore ways to more effectively regulate the use of new technologies and ensure financial stability and consumer prote
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Mar 25, 2024
- FSC to Bolster the Role and Function of the Council on International Financial Cooperation
- The Financial Services Commission and the Council on International Financial Cooperation announced measures to bolster the role and function of the CIFC for 2024 on March 25. The CIFC was launched in 2013 with aims to support domestic financial institutions business expansion overseas and facilitate their sharing of experience and know-how with other countries. Financial institutions from the public and private sectors as well as financial industry associations are members to the CIFC, which is currently run by the Korea Institute of Finance. Since its establishment, domestic financial institutions demand for overseas business expansion has grown. In order to meet this demand and more systematically support domestic financial companies overseas business expansion, the FSC has prepared the following measures to bolster the role and function of the CIFC. First, the networking program including forums and seminars will be held more frequently and more in association with other relevant programs made available by international organizations, for instance. Second, an integrated database system will be set up to facilitate information sharing and exchange between members. Third, the training program will be overhauled to provide more effective vocational training courses on a longer-term basis. Fourth, a visiting scholars program will be newly introduced to invite senior officers from overseas financial regulatory agencies for joint research projects and collaboration. In 2024, this research program will begin with Indonesia and then be expanded to Vietnam. In 2024, the CIFC plans to hold financial cooperation forums twice to provide more opportunities for networking. The CIFC has plans to offer long-term training courses to foreign government officials from Laos, Thailand, Cambodia, and Malaysia. With its organizational capacity expected to grow beginning from this year, the CIFCs role of serving as a control tower for domestic financial sectors business expansion overse
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Feb 28, 2024
- Rule Changes Proposed Regarding Insider Transactions under the FSCMA
- The Financial Services Commission issued a preliminary notice of rule changes being proposed concerning the ex-ante disclosure requirement for insider transactions under the Financial Investment Services and Capital Markets Act (FSCMA). With regard to the ex-ante disclosure requirement for insider transactions, the revision proposal specifies the entities that will be exempted from the disclosure duty, the volume and type of transactions that will be exempted from the disclosure duty, and the procedure and method for disclosure. First, the rule changes being proposed exempt pension funds and other financial investors that are expected to have higher levels of internal control standards and are unlikely to misuse material nonpublic informationsuch as collective investment vehicles, banks, insurance companies, specialized credit finance companies, financial investment businesses, venture capital firms, and the Korea SMEs and Startups Agencyfrom the duty to disclose their stock transaction plans in advance for insider transactions. Moreover, an exemption from the ex-ante disclosure duty will also be granted to foreign investors that are deemed to have an equivalent status to the above mentioned domestic financial investors to ensure more equal treatment of both domestic and foreign investors. Second, the rule changes being proposed grant an exemption if the volume of transactions in particular securities typesover the past six months is less than one percent of the total number of shares issued by the company within that particular year and if the total amount of transactions is less than KRW5 billion. Moreover, an exemption from the ex-ante disclosure duty will also be granted for transactions resulting from a statutory requirement, tender offers, or acquisitions or dispositions following corporate spin-offs or mergers. Third, the rule changes being proposed require that companies insider transaction plans specify the expected transaction price and volume as well as t
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Feb 27, 2024
- FSC Vice Chairman Holds Investor Relations in Singapore and Introduces the Corporate Value-up Program
- Vice Chairman Kim Soyoung of the Financial Services Commission held an investor relations event in Singapore with major institutional investors from Asia participating on February 27. During the dialogue, Vice Chairman Kim outlined the governments capital market reform initiatives with a particular attention on the recently announced Corporate Value-up Program, which have gained much interest from both domestic and overseas investors. The following is a summary of Vice Chairman Kims remarks. The Korean governments capital market reform measures have been focused on the following three areas. First, to establish a fair and transparent market order, the government has bolstered measures against unfair trading activities. A temporary ban on short-selling has been put in place to make trading conditions more equal for both retail and institutional investors and to build a completely electronic short-selling transaction system designed to prevent naked short-selling activities. Second, to make Koreas capital markets more accessible to investors, the authorities have already abolished the foreign investors registration requirement, mandated companies to file disclosures in English in phases, and eased the reporting requirement to facilitate the use of omnibus account. To help expand domestic investor base, the government has already decided to repeal the planned introduction of capital gains tax on financial investments and plans to expand tax benefits for individual savings accounts (ISAs). Third, to promote shareholder values in corporate management practices, the government has been consistently working on various measures aimed at protecting the rights of general shareholders. As a consequence, many large companies have now adopted the improved dividend payout procedure in which investors are able to make investment decisions while knowing how much they will receive in dividends. In addition, the Corporate Value-up Program, which was unveiled on February 26, is design
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Dec 18, 2023
- Provision of Corporate Disclosures in English from 2024 to Enhance Information Access for Foreign Investors
- The Financial Services Commission announced that from January 1, 2024, large KOSPI-listed companies will begin to provide English disclosures on material information within three business days from filing disclosures in Korean with the KRX. This is the first phase of the mandatory English disclosure requirement being implemented as part of the comprehensive measures to improve foreign investors access to Korean capital markets announced in January this year. According to this plan, English disclosures on material information will become mandatory for KOSPI-listed companies in two phases (1st phase from 2024 to 2025 and 2nd phase expected from after 2026) starting with large listed firms. A variety of support programs to promote an expansion of English disclosures will also be made available. From 2024, KOSPI-listed companies with assets worth KRW10 trillion or more will be required to submit English disclosures on (a) matters related to closing financial statement, (b) matters concerning important decision-making and (c) matters pertaining to suspension of trading within three days from filing their regulatory disclosures in Korean. In the meantime, the authorities plan to continue to implement various support measures to facilitate businesses to more easily adjust to the mandatory English disclosure requirement. In this regard, special benefits, such as an exemption of listing fee, will be granted to those selected for outstanding English disclosures, and the availability of translation service offered by professional translation service providers will be expanded, while the authorities strengthen training courses on English disclosures. In addition, the authorities plan to work on making improvements to English disclosure platforms (KRXs KIND English website and FSSs DART English website) by expanding the automated machine translation service, providing English search function for Korean statutory disclosures, and enhancing translation quality using AI-based machi
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Dec 14, 2023
- FSC Provides Guideline on Underlying Assets for Fractional Investment Service Providers
- The Financial Services Commission introduced a guideline on the underlying asset requirement of trust beneficiary certificates when a designated innovative financial service provider under the financial regulatory sandbox program intends to provide fractional investment service through issuance of trust beneficiary certificates. The guideline has been prepared after having discussions with the innovative financial service selection committee (Nov. 28) and at FSCs regular meeting (Dec. 13). In principle, fractional investment service providers need to first consider making use of the traditionally available investment vehicles. However, when it is deemed to be not viable, by applying the principle of supplementarity, a regulatory exemption may be granted under the Special Act on Support for Financial Innovation to allow the issuance of trust beneficiary certificates as prescribed by the Financial Investment Services and Capital Markets Act (FSCMA). Those applying to assume fractional investment business under the regulatory sandbox program should first look into ways to do so by making use of the traditionally existing means of investment vehicles permitted under current laws. Moreover, they should consider that there needs to be a sufficient level of contribution to innovation and investor convenience in issuing trust beneficiary certificates. In this regard, the supplementarity principle will be applied in a flexible manner to allow testing of innovative financial services, if the applying entity has given adequate consideration about the supplementarity principle, and that if there is not much usage of traditional investment vehicles in the fractional investment market. The trust beneficiary certificates underlying asset requirements include the following. First, an objective valuation and assessment should be available. The issuer of trust beneficiary certificates should determine the issuing price and quantity after assessing the value of trust assets, and the i
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Dec 13, 2023
- Investing in Domestic Capital Markets Made Easier for Foreign Investors
- The Financial Services Commission announced that a set of measures intended to enhance foreign investors access to domestic capital markets will take effect from December 14, 2023. The measures include the abolishment of foreign investors prior registration requirement, the easing of reporting duty for foreign securities firms in their use of omnibus account, and the expanded scope of foreign investors OTC transactions eligible for ex post reporting. Meanwhile, the mandatory English disclosure rule for listed companies will phase in from January 1, 2024. First, the foreign investor registration system, which mandated foreign investors to register with the Financial Supervisory Service (FSS) prior to making investment in domestic stock markets, will be abolished. As the revised Enforcement Decree of the Financial Investment Services and Capital Markets Act (FSCMA) takes effect from tomorrow (December 14), foreign investors are able to open investment accounts in domestic capital markets either with a legal entity identifier (LEI, for corporate investors) or a passport number (for individual investors) without going through a prior registration process. Those that have already been assigned a foreign investor registration number can still use their identifier so as to help to minimize causing unnecessary inconvenience. Second, the use of omnibus account for foreign securities firms will be made more convenient. Although the omnibus account system has been available since 2017, it has never been utilized by foreign securities firms due to the heavy burden of reporting rule, which required them to instantly report each end-investors completed transactions at the moment of settlement (T+2). Starting from tomorrow, their reporting cycle will be eased to once every month. Under the revised rules on financial investment businesses, foreign securities firms will be required to reportas of the last day of every montheach end-investors transaction details to an omnibus account
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Nov 16, 2023
- Authorities Discuss Stock Short Sale Reform Measures
- Vice Chairman Kim So-young of the Financial Services Commission attended a meeting on short selling reform measures which brought together authorities from the private sector, the ruling party of the National Assembly and the government on November 16. At the meeting, the authorities discussed a direction for making improvements to the short selling system. The reform measures discussed at todays meeting are not finalized measures for implementation but a set of proposals laying out a direction for further discussions and refinement at the National Assembly and with the public. Overall, the proposed measures are aimed at (a) leveling the playing field between institutional and retail investors, (b) preventing naked short sales in advance, (c) strengthening the detection and punishment of illegal short selling activities, and (d) expanding short sale disclosure. Stock Short Sale Reform Proposal I. Leveling the playing field Currently, the stock borrowing conditions for short selling remain unequal between institutional investors and retail investors, although the gap has been narrowed considerably through past reform measures for retail investors, extending the stock repayment period from 60 days previously to 90 days and lowering the margin requirement from 140 percent previously to 120 percent. However, the discrepancies in stock lending still exist and this has been raised as a problem of unleveled playing field for retail investors vis--vis institutional investors. As a way to resolve this problem, the authorities propose making the stock repayment period and margin requirement same for both institutional investors and retail investors. More specifically, first, the stock repayment period for institutional investorscurrently unrestricted and determined on a contract-by-contract basiswill be set as 90 days, same as that for retail investors. The Korea Securities Depository, which handles stock lending to institutional investors, should check the repayment period o
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Nov 05, 2023
- FSC Decides to Ban Stock Short Selling Until June 2024 and Seek Measures to Improve the System
- The Financial Services Commission held a meeting on November 5 where the authorities decided to ban all stock short selling in domestic markets (all KOSPI, KOSDAQ and KONEX listed items) effective from Monday, November 6, 2023 until the end of June 2024. With the continuation of high interest rate environment and stagnant growth in the global economy, coupled with geopolitical risks such as the armed conflict between Israel and Hamas, there are growing uncertainties for the Korean economy. In particular, during the second half of this year, stock market volatility in domestic stock markets has risen to much higher levels compared to other major markets overseas,which caused anxiety in the market. Despite a series of measures introduced in the past,recently, the authorities have discovered a number of illegal naked short selling practices conducted by foreign and institutional investors, raising concerns about the fair pricing function of domestic stock markets. Recently, a large-scale naked short selling case involving global investment banks was detected, and an investigation is currently taking place with discovery of additional unlawful activities. As such, the FSC finds that the situation with illegal short selling is very dire as it can erode the fair pricing function of the market and degrade confidence in the market. Therefore, considering the need to preemptively respond to the rising market uncertainties and address concerns about the potential weakening of the markets fair pricing function, and with the practice of illegal naked short selling taking place in a more routine way, the FSC decided to ban short selling on all domestic stock items until the end of June next year. Meanwhile, during the period of banning short selling, the government will work on proactive measures to improve the system in a way that will help to root out illegal short selling activities when short selling resumes thereafter. In this regard, first, the authorities will work on mea
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Oct 31, 2023
