The attached booklet outlines the government's comprehensive short sale reform measures intended to prevent illegal and unfair trading activities and ensure protection for investors.

The Korean government has been working to improve regulations on short selling with goals to prevent illegal short sale activities and minimize their negative effects. Despite various efforts, large-scale naked short sale activities have been uncovered repeatedly, threatening to undermine fair price formation in the market. Against this backdrop, the government imposed a temporary short sale ban of all stocks effective initially from November 6, 2023 to June 30, 2024, and then extended the period of short sale ban until March 30, 2025.

Meanwhile, the government and relevant authorities launched a taskforce and held a series of public discussions with various stakeholders to seek ways to bring about fundamental improvements to short sale regulations and market practices.

After having a series of public discussions, it was found that foreign and institutional investors demand more regulatory clarity and predictability, while retail investors call for an electronic system that can thoroughly monitor short sale transactions and a limit on institutional investors’ stock repayment period. Also, since retail investors make up a large share in Korean stock market when compared to the situation in other countries, it is necessary for the financial authorities to help foreign investors better understand about this peculiar characteristic in Korean stock market, which demands more rigorous regulations for short sale activities.

Against this backdrop, the government has drawn up plans to make fundamental improvements to shot sale regulations, which will help to prevent the potential of illegal short sale activities disrupting market’s function of fair price formation.

Please see the attached PDF for details.