According to Korean financial authorities, the amendment to improve the short selling system passed the National Assembly. As part of the amendment, institutional investors will now be legally required to establish an electronic short selling system, and both institutional and corporate investors must implement internal control standards as a legal obligation.
The amended law will come into effect on March 31 next year, allowing time for the establishment of the electronic short selling system, which is scheduled to be operational by then. However, the restrictions on financial product trading and executive appointments and reappointments will come into force six months after the law is enacted, following thorough public consultation and before the amendments to the lower legislative provisions.
The upcoming revisions to the enforcement decree and regulations, which will lower the short selling disclosure threshold from 0.5 percent to 0.01 percent of outstanding shares and reduce the collateral ratio for individual short sellers to the level of institutional investors, are expected to be completed by next month.
A representative from the Financial Services Commission (FSC) was cited by BusinessKorea stating: “Once the loan repayment period for short selling transactions and lending stocks is limited to 12 months and the ongoing amendments to the Regulations on the Financial Investment Business are finalized, the collateral ratio for individual short sellers will be lowered from 120 percent to 105 percent, leveling the playing field between individuals and institutions….With the electronic short selling system set to go live in March and the implementation of the amended law, the improvements to the short selling system will be fully completed.”