10 February 2017
Seoul
Reporter: Drew Nicol

South Korea confirms fresh short selling rule deadline


South Korea’s financial regulator has revealed further details of its stricter short selling rules, set to come into force on 27 March.

The Korean Stock Exchange will be handed new powers to withdraw "overheated" stocks that receive “extraordinary increases in short selling and sharp falls in prices” during a single day for a 24-hour cooling off period, as outlined in a statement by Korea’s Financial Services Commission (FSC) in November 2016.

Detailed conditions for the definition of “overheated” will be determined and announced soon.

In addition, the new rules dictate that securities to be short sold must be pre-delivered to the client’s account. This amends the current rule that entities that violate short selling rules must submit the “agreement of securities borrowing” or to pre-deliver securities to be sold, before making further short-sell trading.

According to the Korea Exchange the new rules will help to mitigate information asymmetry in short selling, while forcing short selling violators to pre-deliver securities prior to short-selling will enhance the effectiveness of penalties and bolster market transparency.

The FSC promised to strengthen sanctions against those who violate its short selling rules.

Rules such as the prohibition of uncovered short-selling and up-tick rules will be subject to “heftier fines” than those imposed on other violations.

In addition, those that short a stock during the period of paid-in capital increase will be barred from buying the newly-issued stocks.

Furthermore, price manipulative activities exploiting short-selling positions will be added to types of ‘market disruptive activities’ under the Financial Investment Services and Capital Markets Act.

The rule changes come as part of wider-spread reforms of South Korea’s financial framework.

Previously, in late 2016, the deadlines for reporting and disclosure of short positions in large amounts or by shares was shortened from T+3 to T+2.

More regulation news
The latest news from Securities Lending Times
Join Our Newsletter

Sign up today and never
miss the latest news or an issue again

Subscribe now
France raises spectre of European financial transactions tax
15 December 2017 | Paris | Reporter: Jenna Lomax
French President Emmanuel Macron and several ministers have dismissed concerns over the negative effect of an EU financial transactions tax on securities lending revenue
Final leverage ratio rule a boon for CCPs
11 December 2017 | Basel | Reporter: Drew Nicol
The final version of Basel III’s leverage ratio rules are providing an early Christmas present for CCPs due to re-orientation towards RWA over minimum capital requirement
Collateral pains stinging buy side
06 December 2017 | London | Reporter: Jenna Lomax
“Regulation is limiting possibilities for the securities lending market”, according to Habib Motani, an international financial markets lawyer at Clifford Chance
SFTR code of conduct not fit for purpose, says SASLA
05 December 2017 | Johannesburg | Reporter: Drew Nicol
The South African Securities Lending Association has raised serious concerns over the applicability of a proposed code of conduct for securities financing participants in the region
SLR and SCCL changes on the horizon, says BNY Mellon
01 December 2017 | New York | Reporter: Zsuzsa Szabo
Adjustments are expected on the Supplemental Leverage Ratio (SLR) and Single Counterparty Credit Limits (SCCL) in the near future, following industry concerns
EEA members’ supervisory weaknesses exposed in ESMA review
30 November 2017 | Paris | Reporter: Jenna Lomax
ESMA said those NCAs who did not identify good practices, would be consulted by ESMA on how they can make improvements in time for the MiFID II deadline
IHS Markit partners with Regis-TR on SFTR
29 November 2017 | London | Reporter: Jenna Lomax
Regis-TR, the European trade repository, has collaborated with IHS Markit to create a reporting solution for SFTR requirements