The lifting of South Korea’s short sale ban has ignited a surge in stock on loan, writes S&P Global Market Intelligence.
The lifting of the ban in March 2025 included reforms, such as introducing the Naked Short-Selling Detecting System (NSDS), designed to prevent illegal short selling in real-time. This system aims to create a transparent trading environment, ensuring all market participants adhere to the same rules. Additionally, new regulations mandated institutional investors to implement robust internal control procedures and inventory management systems to mitigate risks.
As a result of these reforms, the value of stock on loan surged dramatically, nearing the all-time high of $25 billion set in 2023. This spike indicates renewed interest in short selling, suggesting market participants are eager to engage in this strategy under the new regulatory framework. The significant increase in stock on loan reflects a broader trend in financial markets, where investors seek opportunities to capitalize on price fluctuations amid ongoing economic uncertainties.
