South Korea’s securities regulator, the Financial Services Commission, has removed the ban on the short-sale of financial stocks. The ban has been in place since 2008.
Naked short selling is prohibited in Korea. On 1 October 2008, covered short sales were also banned. Short sales of financial stocks have remained prohibited since then, whilst the ban on short sale of non-financial stocks was lifted in June 2009, though it was temporarily reinstated for a three-month period during the European debt crisis.
The regulator also said that a disclosure of short selling positions would need to be made on the Korea Exchange website when a position exceeds 0.5% of total shares. Short sales less than KRW100 million will be exempt from disclosure requirements. This disclosure rule will come into effect in 2014.
The regulator said it hoped lifting the ban would boost trading, as financial stocks represent 12% of total market capitalisation. It added that the new disclosure requirement will improve transparency and should enhance the credibility of Korea’s capital markets.