South Korea Revises Short Selling Policies for Retail Investors

On Nov 16, South Korea's financial regulator announced that stock short-selling rules will be relaxed for retail investors, while institutional and foreign investors will face tighter regulations. This is to ensure a fair and equal playing field in the market. The stock market currently has a heated debate over the ban on short selling. The FSC announced in a statement that it will decrease the collateral ratio for retail investors borrowing stocks from 120 percent to 105 percent to align with the ratio for institutional investors.

Institutional investors will now have a maximum 90-day limit on borrowing stocks for short selling, aligning with the rules for retail investors, as stated.

The FSC announced the measures, along with rules to prevent illegal trades, after a meeting with other financial authorities and the ruling party to prepare regulatory changes for short selling in the stock market.

After the meeting, FSC Vice Chairman Kim So-young was quoted by local media as saying that the ban on short selling of stocks will remain in place until there are sufficient improvements in regulations. Retail investors are in favor of the short-selling ban, claiming that allowing big players to bet on market declines has only exacerbated price swings.

On the other hand, analysts argue that the ban has made the market less appealing, limiting investors' ability to manage their risks and diminishing liquidity and price rebound. The FSC announced that the proposed measures from Thursday will be further discussed publicly and in parliament before being finalized for the legislative process.