Ban on Short Selling Stocks in Korea Extended Until March 2025

• On 13 June, the Korean government announced that it will extend a ban on short selling stocks in Korea until end of March 2025.

• For now, the government has not given a 100% go-ahead on the end of the ban on short selling stocks starting 1 April 2025.

• However, in our view, the government is likely to allow short selling stocks in Korea once again, sometime in 2Q 2025.

Photo by jet dela cruz on Unsplash

On 13 June, the Korean government announced that it will extend a ban on short selling stocks in Korea until end of March 2025. The ban was originally set to expire on 30 June 2024. For now, the government has not given a 100% go-ahead on the end of the ban on short selling stocks starting 1 April 2025. However, in our view, the government is likely to allow short selling stocks in Korea once again, sometime in 2Q 2025.

• Complete comprehensive computer system to detect naked short selling - One of the major reasons for extending the ban on short selling in Korea is to have a comprehensive computer system in place that detects naked short selling.

  • The plan is to require institutional investors, who account for more than 92% of all short-selling transactions, to establish their own balance management system to block naked short-selling in real time.

  • In addition, a Centralized Naked Short Selling Detection System (NSDS) will be established by the Korea Exchange to ensure institutional investors' safety.

  • The financial authorities plan to inspect all illegal short sales within three days and verify the effectiveness of the balance management system within the institution.