Short selling repayment in 90 days and collateral ratio of 105% unified… “Level the playing field”

As a follow-up measure to the ‘temporary ban on short selling’, the party and government will unify the loan repayment period and collateral ratio for individual and institutional investors.

The government and the People Power Party held a consultation with market experts on the 16th to agree on such measures, People Power Party Policy Committee Chairman Yoo Yu-dong said in a briefing.

Chairman Yoo explained, “We decided to create more favorable conditions for individuals with short-selling trading restrictions than for institutions.”

First, the repayment period for lending transactions by institutions requiring early repayment was set to 90 days, the same as for individual lending services, but could be extended.

The loan-to-collateralization ratio for individuals (currently 120%) will also be lowered to 105%, the same as that for institutions and foreigners.

Existing individual investors must maintain the ratio of the total amount of collateral they must hold to the amount of stocks borrowed during short selling at more than 120%, but institutions and foreigners are subject to 105%, which has continued to raise criticism that it is a ’tilted playing field.’

The party and government also discussed mandating internal computer systems and internal control standards for institutional investors to prevent unleveraged short selling in advance.

Chairman Yoo explained, “We will further review the feasibility of establishing a system that completely blocks non-leveraged short selling in real time externally, focusing on the Financial Supervisory Service and the exchange, as well as alternatives.”

Financial authorities plan to intensively investigate and severely punish illegal short selling, and also check the legality and adequacy of market makers and liquidity providers.

The party and government decided to diversify sanctions against illegal short-selling traders, such as restricting stock trading and restricting the appointment of executives, and to strengthen the level of punishment.

Lee Bok-hyeon, head of the Financial Supervisory Service, said, “In addition to what was revealed externally in the investigation of illegal short selling, we are investigating specific cases internally against more than three to four companies,” and added, “Regarding overseas markets, we are cooperating with cooperative authorities such as Hong Kong.” .

Regarding the establishment of a real-time computer system related to short selling, Financial Supervisory Service Chairman Lee added, “We plan to operate a task force to listen to the opinions of the exchange and the Financial Supervisory Service on how to operate the computer system,” and added, “We are reviewing various possibilities.”

Kim So-young, Vice Chairman of the Financial Services Commission, said, “The temporary ban on short selling will be until the end of June next year, but we plan to look at the market situation then and determine whether the system has been sufficiently improved.” He added, “We will do our best to resume it by the end of June. “If the situation is not sufficient, it can be extended,” he explained.

Previously, the authorities decided to temporarily ban short selling until the first half of next year and push for system improvement, citing concerns that the current short selling system would create a ’tilted playing field’ between individuals and institutions.

Policy Committee Chairman Yoo said, “Today’s discussion is not the last, but the beginning of future efforts,” and added, “We will accept a wide range of opinions to ensure that illegal and unfair issues related to short selling are not repeated, and we will finalize the final draft as soon as possible and push for legislation.” said.