Measures

Details

Requiring Legislative Action

(a) Establishment of Real-Time Inventory Management System: by All Institutional Investors

All institutional investors (corporate investors with a net short position balance of 0.01 percent or more, market makers, and liquidity providers) will be required to set the sellable inventory limit on a real-time basis.

Yes

(b) Establishment of Naked Short-Selling Detection System (the “NSDS”): by the KRX

The KRX will develop the NSDS, allowing the KRX to confirm whether there were any naked short sale activities by market participants within a prescribed period (three days after the transaction), and requiring institutional investors to report to the KRX regarding SOD inventory and details of OTC trades within prescribed deadline (two days after the relevant transaction).

Yes

(c) Adoption of Internal Control Standards (the “Internal Control Guidelines”): by all institutional and corporate investors

All institutional investors and corporate investors will be required to prepare the Internal Control Guidelines to prevent the systemic failure of the inventory management system and occurrence of naked short sale.

Yes

(d) Additional Verification Obligations for Korean Securities Companies

KRX members receiving short sell orders will be required to (i) verify the internal inventory management system and the Internal Control Guidelines of the clients on an annual basis, and (ii) accept short sale orders only from the clients for whom the aforementioned verification process is completed.

Yes

Measures

Details

Requiring Legislative Action

(a) Term of Stock Loans

For both institutional investors and retail investors, the applicable stock loan repayment period would be “90 days,” which may be extended for a total of 12 months.

Yes

(b) Adjustment of Collateral Ratio for Retail Investors

The cash collateral ratio for both institutional investors and retail investors will be set at 105%. In addition, for retail investors, the collateral ratio for KOSPI 200 stocks will be set at 120% (which is lower than the 135% for institutional investors).

No

Measures

Details

Requiring Legislative Action

(a) Continued Enforcement Actions for Illegal Short Selling

The FSS and the FSC will continue to strongly enforce the Korean short sale regulations.

Yes

(b) Increasing Monetary Penalties and Applicable Imprisonment Sentence

The level of criminal fines for illegal short sales would be increased to four to six times the amount of unfair profits. The individual perpetrator(s) may be subject to a life sentence, depending on the amount of the unfair profits.

Yes

(c) Imposition of Additional Administrative Sanctions

In case a person violates the Korean short sale regulations, the person may be subject to administrative sanctions including prohibition from (i) trading financial investment products in the domestic market for up to ten years, and (ii) serving as an executive for financial companies or listed companies for up to ten years.

Yes

Measures

Details

Requiring Legislative Action

(a) More Stringent Disclosure Requirement

Investor(s) with the net short position balance equivalent to 0.01 percent of total issuance volume or KRW1 billion or more would be required to make public disclosure of such position.

Amendment of Enforcement Regulations

(b) Restriction for Acquisition of Convertible Bonds (“CBs”) or Bonds with Warrants (“BWs”)

Upon disclosure of a plan to issue CBs/BWs until disclosure of issuance price for relevant CBs/BWs, investors who placed short sale orders will be prohibited from acquiring relevant CBs/BWs.

Yes