In response to the demand from individual investors for the introduction of a no-borrowing short selling monitoring system, securities-related agencies have indicated that it is practically challenging and proposed institutional investors to establish their own systems.
During a forum hosted by the Korea Exchange (KRX) titled “Computerization Forum for Preventing Illegal Short Selling” on Dec. 27, Song Ki-myung, the head of the Stock Market Division at the KRX, announced that institutional investors are encouraged to establish their own short selling balance management systems in order to prevent illegal short selling. He further stated that securities firms would be obligated to inspect these systems.
Director Song mentioned, “Individual order and payment details are easily managed by securities firms. However, it is difficult for third parties to grasp the balance and transaction details as foreign investors and institutions have different entities managing orders and payments. We will impose an obligation on institutional investors to independently establish internal balance management systems. Additionally, securities firms will be mandated to inspect the system implementation at least once a year.”
He further stated, “Penalties will be imposed on institutions and securities firms that neglect their obligations. We are currently forming a task force to examine the implementation of computerized systems, and we plan to develop suitable measures, finalize them through public discussion, and announce them by June of next year.”
On the other hand, Kim Duk-ey, the representative of the Financial Justice Solidarity, who participated as a debater, emphasized, “The measures proposed by financial authorities in 2018 were not pursued due to astronomical costs and system overload. This is a matter of restoring trust, and it is crucial to invest astronomical costs to restore the credibility in the capital market.”
After incidents such as the “Phantom Stock Dividend Case” at Samsung Securities in 2018, former Financial Services Commission Chairman Choi Jong-ku had announced plans to establish a stock balance trading monitoring system for the detection of naked short selling.