Considering that market volatility is increasing due to the aftermath of the war in the Middle East, the Financial Supervisory Service instructed securities firms to strengthen internal controls to prevent market disruption caused by illegal short selling.
On the 13th, the Financial Supervisory Service (FSS) held an emergency meeting with major securities firms participating in the short-selling central inspection system (NSDS). At the meeting, officials reviewed the status of internal controls related to short selling and shared major violation cases and system improvement items.
Lee Seung-woo, assistant deputy governor for disclosures and investigations at the Financial Supervisory Service (FSS), said, "With market volatility heightened, systematic compliance management is necessary so that short selling does not undermine confidence in the market."
Lee asked the securities firms attending the meeting to do the following: ▲ thorough control at the short-selling order stage ▲ stronger internal controls related to short selling ▲ tighter management of IT systems ▲ enhanced market surveillance. Lee said, "To prevent naked short selling, functions such as the process for calculating sellable balances and blocking orders that exceed available balances must be strictly managed."
Noting that many recent cases of naked short selling were caused by simple mistakes or errors, Lee stressed the need to check compliance monitoring functions to ensure internal controls work properly. Lee also called for tighter surveillance of acts that use short selling to unduly influence stock prices and cooperation to establish market order by actively reporting to the FSS when abnormal signs are detected.
The Financial Supervisory Service (FSS) plans to continue monitoring short-selling trends and to promptly investigate and take stern action against short selling that disrupts the market. An FSS official said, "We will continue to communicate with the industry so that the short-selling management system can be operated stably in the field."