Korea’s Financial Services Commission (FSC) announced that a revision bill for the Enforcement Decree of the Financial Investment Services and Capital Markets Act (FSCMA) was approved, intended to strengthen the disclosure requirement on investors’ net short position balance as part of the comprehensive short sale reform measures.
Investors with a net short position balance of 0.01 percent, excluding those with less than KRW100 million ($71.5k) or KRW1 billion or more of total issuance volume will be newly required to disclose their net short position balances from December 1. Previously, only those with a net short position balance of 0.5 percent or more were subject to the disclosure requirement. Therefore, investors that will newly become subject to the disclosure requirement — those with a net short position balance of 0.01 percent or KRW1 billion or more but less than 0.5 percent — will begin to disclose their net short position balances from December 4.
The government and relevant institutions have been working on comprehensive short sale reform measures in order to address the problem of illegal and unfair trading practices. Some of the reform agendas requiring no revision to legislation have already been put into place. On September 27, the supervisory regulation on financial investment businesses was revised to bring down the cash collateral ratio of retail investors when borrowing stocks to 105%, which is the same level in place for institutional investors.
The reduced cash collateral ratio for retail investors is expected to become effective from March 31, 2025. For market makers and liquidity providers, their stock borrowing period has been already limited to maximum 12 months with 90-day extensions each time through system upgrades made at the securities lending institutions (Korea Securities Depository and Korea Securities Finance Corporation) from November 1.
Additional announcements for regulatory revisions will be made this month regarding other reform areas, such as the establishment of an electronic short sale processing and monitoring system, internal control standards, securities companies’ verification duty, and the limit on institutional investors’ stock borrowing period, as a follow-up to the passage of the revised FSCMA on September 26.