S. Korea set to ban short selling temporarily

SEOUL, Sept. 24 (Yonhap) -- South Korea's financial watchdog said Wednesday it
will impose a temporary ban on short selling of dozens of stocks next month as "a
considerable number" of brokerage houses were found to have violated related
regulations.
The suspension, to be effective on Oct. 13, will affect 45 stocks that are traded
on the country's main and secondary stock markets and are "under close regulatory
monitoring," the Financial Supervisory Service (FSS) said.
"After checking cases, the watchdog plans to pursue disciplinary actions against
the securities firms in question," Song Kyung-chul, deputy governor of the FSS,
told reporters. "Supervision of short selling will be strengthened to minimize
any negative impact on the market."
Short selling refers to the practice in which investors sell shares by borrowing
them in anticipation of price falls. Short sellers can make profits by buying
back shares at a lower price and then returning them.
South Korea does not allow so-called "naked short selling," in which investors
unload shares which they do not own, but only permits investors to sell borrowed
stocks. Short selling has been blamed for amplifying financial market jitters by
sparking price falls.
According to the FSS, some investors made banned naked short sales, while more
foreign traders have also violated the regulations on short selling.
The move came two days after Jun Kwang-woo, chairman of the Financial Services
Commission (FSC), said that the regulator would consider beefing up the rules on
short selling if necessary.
Since late August, the FSS has been looking at whether a total of 52 local
brokerage houses and related agencies have broken related regulations.
Global regulators have put a temporary ban on short selling. The U.S. Securities
and Exchange Commission banned short selling for 10 days on Friday after Britain
imposed a four-month curb on short selling of financial stocks Thursday, making
moves to calm financial market turmoil.