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A study on the improvements to revitalize short selling from the perspective of protecting the interests of individual investors

  • Industry Promotion Research
  • Abbr : IPR
  • 2024, 9(2), pp.29-35
  • DOI : 10.21186/IPR.2024.9.2.029
  • Publisher : Industrial Promotion Institute
  • Research Area : Interdisciplinary Studies > Interdisciplinary Research
  • Received : April 4, 2024
  • Accepted : April 25, 2024
  • Published : April 30, 2024

Se-Dong Yang 1,  Jae-Yeon Sim 1

1세한대학교

Accredited

ABSTRACT

Recently, the Korean financial market has implemented a ban on unleveraged short selling, and leveraged short selling, which involves selling borrowed securities, is called general short selling. This study sought to come up with improvement measures to revitalize short selling from the perspective of individual investors. Short selling refers to selling stocks you do not own in the stock market, predicting that the stock price of the stock will fall, and borrowing stocks to sell them. Based on the results of this study, the short selling market's growth and improvement plans are as follows. First, a plan must be developed to expand short selling opportunities for individual investors. In the domestic short selling market, including KOSPI and KOSDAQ, foreign and institutional participants account for more than 95% of the market, and individual investors are very small. Therefore, its expansion is inevitable. Second, monitoring and punishment for unfair short selling transactions must be strengthened. Representative improvement measures that can minimize the side effects of short selling include strengthening monitoring of unfair trading and short selling, and raising the level of punishment. In addition, measures must be taken to further increase the level of punishment for short selling related to unfair transactions. Third, the short selling reporting and disclosure system needs to be improved. In the case of Korea, short selling transactions are not yet as active as in developed countries, but there is a need to expand the disclosure system to strengthen market transparency in preparation for future short selling transactions becoming more active. In conclusion, it is reported that if short selling regulations are excessively strengthened, losses may occur in terms of price efficiency and market liquidity, which may ultimately have a negative impact on the market. Therefore, policies related to short selling must be made while taking into account the positive aspects of regulatory effects and the negative impact on the market.

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