Nam Seung-ryul Economic Industry Editor
– On the 2nd, the Financial Services Commission, which had been thinking about whether to resume short selling due to the politicians watching public opinion ahead of the election, came up with a compromise called’partial reopening’. The Financial Services Commission plans to resume short selling only for stocks belonging to the KOSPI 200 and KOSDAQ 150 indexes from May 3rd. Short selling is a trading technique in which stocks are sold by borrowing and then bought again and paid off. If the stock price falls after short selling, you can make a profit. Financial authorities and stock market experts are in the position that’there is no evidence that short selling causes stock prices to decline’, but individuals stipulate that’short selling is evil’. In fact, there have been a number of things at home and abroad that are suspicious that the short selling forces are shaking stock prices by releasing’malicious news’. There have even been several incidents of’non-borrowing short selling’ in which stocks are not borrowed.
Distortion of facts in the online space
The urgent need to strengthen surveillance by authorities and improve the system
– The controversy over short selling is intensifying as such illegal transactions have taken place soon. In particular, as the number of individuals investing in stocks increased sharply after the Corona 19 crisis, the voice of a’tilted playground’, where short selling was disadvantageous to individuals, grew even more. It is not irrelevant to this background that the financial authorities have tried to appease individual investors by distributing the data on the 3rd,’This is the fact of short selling.’ In the same context, on the 4th, it revealed the status of investigations on the allegations of non-borrowing short selling by four securities companies.
Although the financial authorities went to public opinion with content such as’Investors didn’t always make a profit even if they sold short’, they are not working well. There is a lot of speculation and black propaganda related to short selling on portal comments and YouTube. In particular, the case of the US gamestop, where individual investors cooperated to fight against short selling forces such as hedge funds, is reported.
First of all, the period to borrow stock. It is common to see fake news content that the loan period is 30 days in the US and unlimited in Korea. The facts are different. There is no time limit (up to 60 days for individuals in Korea) if the US or Korea or the parties to the transaction agree. You only have to pay a fee. It is not because of the loan period that the hedge fund raised its hand in the GameStop case. It is highly likely that the burden of collateral paid to trading institutions when borrowing stocks due to a surge in stock prices has grown excessively, or that the loss cut has declared surrender beyond its own loss regulations.
It is also not true that the punishment for illegal short selling in Korea is at the level of a cotton bat. When a non-borrowing short sale is detected, imprisonment for one year or more in Korea and up to 20 years in the US is possible. However, the maximum sentence for abandoned imprisonment under the domestic criminal law is 30 years (up to 50 years with aggravated punishment), which is longer than in the United States. It is also different from the fact that domestic institutions do not pay transaction tax and do not deposit margin. Institutions also have to provide cash and bonds as collateral when borrowing stocks and pay transaction tax when trading borrowed stocks. Also, it is not true that the information related to short sale provided for free on the Korea Exchange website was changed to a fee or that it was blocked from viewing.
It wasn’t like this was to advocate the short selling system. This is because the financial authorities need to take a closer look so that individual investors are not fooled by false information or fake news. Isn’t it the age of seeing only what they want to see and believing what they want to believe? ‘Korea is neither a short selling nor a heavenly public opinion war, but institutional improvement is also essential. For example, the authorities will shorten the detection cycle of illegal short selling from 6 months to 1 month and strengthen surveillance, but individual investors are still showing animosity. It is not just a matter of looking around that’no country has a real-time proactive surveillance system and its cost-effectiveness is low.’ Shouldn’t we be swayed by public opinion, but actively seek an alternative that meets the demands of public opinion?
Nam Seung-ryul Economic Industry Editor
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