South Korea Fines BNP, HSBC $20 Million for Naked Short Selling

SEOUL, Nov 27 (Nikkei) - South Korea's ban this month on short-selling of stocks has been welcomed by the country's vocal army of retail investors who claim the practice favors institutional counterparts but criticized by analysts as a government ploy to win their support in national legislative elections next year.

The bombshell from market regulator the Financial Services Commission (FSC) came on Nov. 5, at an unscheduled Sunday briefing when it was announced that there would be a prohibition on short-selling in Seoul stock markets -- except for market makers and liquidity providers -- until the end of June 2024.

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SEOUL, Nov 16 (Reuters) - South Korea's financial regulator said on Thursday authorities plan to loosen stock short-selling rules for retail investors, while tightening rules for institutional and foreign investors, to promote a "level playing field" in the market.

President Yoon Suk Yeol's government introduced the controversial ban on short selling in the stock market this month.

The Financial Services Commission (FSC) said in a statement it would lower the ratio of cash required as collateral for retail investors to borrow stocks to 105%, down from the current 120%, to match the ratio for institutional investors.

For institutional investors, a new cap of a maximum 90 days will be imposed on borrowing of stocks for short selling, in line with retail investors, according to the statement.

The FSC announced the measures, along with rules to prevent illegal trades, after a meeting with other financial authorities and the ruling party to prepare regulatory changes for short selling in the stock market.

The ban on short selling of stocks will stay until there is enough improvement in regulations, FSC Vice Chairman Kim So-young was quoted by local media as saying after the meeting.

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The bombshell from market regulator the Financial Services Commission (FSC) came on Nov. 5, at an unscheduled Sunday briefing when it was announced that there would be a prohibition on short-selling in Seoul stock markets -- except for market makers and liquidity providers -- until the end of June 2024.
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Tries not to laugh at their ridiculous ban, since it's the market makers
and liquidity providers who are the major benefactors of short selling.

That regulation is for public consumption, and wont change anything.
 
mikeriley said:
That regulation is for public consumption, and wont change anything.
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You mean political pandering. But that regulation should have been imposed in November of 2021 when the bear market began rearing its ugly head, not 2023 when the S&P500 nearly recovered all of its bear market losses.

Not only are retail traders bad at timing, so are all these politicians.
 
Don't even think that the fine of $20 million for such huge companies will interfere in any way. It's just peanuts for them, since they pay it from the postage box. As also @mikeriley said, it's political, for public consumption, and wont change anything.
 
Message for Quanto: Please repost so Quanto can see that that people who block other traders from seeing their posts are childish.
 
This is lame. I thought only countries with dictatorships like China interfere with the free market by banning short selling. I can't believe a country like South Korea that practices western democracy does this kind of crap too. Very disappointed with South Korea.
 
Pretty stupid. Is there some sort of crisis in Korea? 8 month short selling ban? Even the US limited the 2008 short selling ban to financials and it was only a few weeks.

[Ironically the problems the financials had was due to their own making where they pushed for mark-to-market accounting for their opaque derivatives holdings (FAS 157 I believe was the name of the FASB standard).]

It doesn't surprise me that much I guess. It was Korea that instituted currency controls after the GFC and basically ended FDI for a while. So in bad times they are a 3rd world country but in good times they pretend to be a 1st world country. Typical of north Asian countries. They are all protectionists when it comes to global trade whether its China, Japan, Korea, etc.
 
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