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(Photo= Yonhap news) |
[Alpha Biz= Reporter Kim Sangjin] The financial regulatory authorities have announced that they will complete the development of a system to crack down on illegal short selling by March next year.
On the 10th, the Financial Supervisory Service (FSS), in collaboration with the Korea Financial Investment Association and the Korea Exchange, held the third "Open Discussion with Individual Investors on Short Selling System Improvements" at the Korea Exchange in Yeouido, Seoul. During the discussion, the FSS stated that their goal is to establish the Korea Exchange's centralized short selling monitoring system (NSDS) by March next year. This comes approximately one year and four months after the FSS and others formed a task force on short selling computerization in November last year.
The FSS explained that time is needed to develop both the new system and the algorithm to detect illegal short selling.
The FSS's plan for the short selling computer system is twofold. First, individual institutions that place short selling orders, such as investment banks (IBs), will operate their internal computer systems to prevent naked short selling. Second, the Korea Exchange will use the NSDS to detect sell orders that exceed the available loan balances of institutions. The goal is to create a feedback structure that connects both systems to verify data.
The FSS intends to encourage each institution to establish its own system for managing loan balances. This month, guidelines for system establishment, checklists, and internal control guidelines will be distributed. Each institution will be required to maintain records of short selling orders for five years, ensuring that these records can be promptly submitted during inspections or investigations by the FSS. Additionally, provisions will be included to sanction related employees if naked short selling occurs.
AlphaBIZ Kim SangJin(letyou@alphabiz.co.kr)
