In response to criticism suggesting that the ban on short selling implemented on Nov. 6 is a “political decision” aimed at next year’s general election, Lee Bok-hyun, the head of the Financial Supervisory Service (FSS), directly refuted the claims, stating, “About 100 stocks were identified as targets for naked short selling.” He said that it was a decisive measure to uproot rampant illegal short selling in the stock market.
Lee concluded a meeting with CEOs of accounting firms held at the Korean Institute of Certified Public Accountants building in the Seodaemun district of Seoul on Nov. 6 and met with reporters. Regarding the complete ban on short selling decided during the Financial Services Commission meeting on the previous day, he emphasized, “It was a necessary step to introduce an advanced short selling system.” He also added, “Currently, around 100 stocks, regardless of whether they are listed on the KOSPI or KOSDAQ, have been identified as subjects of naked, or illegal, short selling, and additional investigations are ongoing.”
Responding to some views characterizing the complete ban on short selling as an “emergency measure” in preparation for the ruling party’s upcoming general election, especially after the incorporation of Gimpo City into Gyeonggi Province, Lee reiterated that it was a measure taken to combat illegal short selling. He described the current situation regarding short selling as, “Not just a street with many broken windows, but rather a market where illegality has become so widespread that all the windows are shattered.” He clarified, “Announcing the ban on short selling without any prior consideration was a significant misunderstanding, and it wasn’t done abruptly without any review.”
Regarding concerns that the complete ban on short selling might hinder inclusion in the Morgan Stanley Capital International (MSCI) World Index, Lee explained, “Individual investors’ trust is also important.” He stated, “Inclusion in MSCI itself is not the ultimate goal,” and added, “Among foreign investors, medium to long-term pension funds as well as passive, or index-tracking, investors also share the opinion that it is challenging to make investments due to its lack of stability in the stock market.”