On March 13, 2020, in an attempt to bring stability to the stock market hit by the outbreak of COVID-19, the Financial Services Commission (the "FSC") announced a six-month ban on short-selling of listed stocks and certain other listed products on the Korea Exchange (the "KRX").  The ban is effective from March 16, 2020 to September 15, 2020.  The short sale ban will cover stocks, DRs, ETFs, ELWs, equity warrants, and beneficiary certificates that are listed on the KOSPI, KOSDAQ and KONEX markets of the KRX.  Exceptions from the ban will be granted to market makers and liquidity providers.

While naked short sales are strictly prohibited and covered short sales are permitted under the Financial Investment Services and Capital Markets Act, the FSC may impose restrictions on covered short sales if they are assessed to disturb market stability or discovery of fair price on the market.  The FSC has previously banned short sales on two previous occasions in October 2008 and August 2011 amidst the global financial crisis.

The FSC announced that it would review the market conditions at the end of the six month period and may consider further extending the short sale ban.