The Financial Services Commission (FSC) announced on March 12, 2012 that it will propose amendments to introduce a mandatory reporting system for high volume short positions in line with global standards adopted by the International Organization of Securities Commissions (IOSCO). The FSC noted that by introducing this reporting regime for large short positions, Korea will be joining the global effort to expand the pool of information for market supervision and to maintain stability of the financial markets.
Under the new system, net open short positions exceeding a certain threshold and subsequent changes to the size of previously reported short positions would need to be reported to the FSC and the Korea Exchange. The trigger level, frequency, and timing of reports will be determined after further review by the regulators. The FSC expects to implement the new reporting regime during 3Q 2012.
Market participants using short sales as one of their key investment strategies should monitor the developments in the new reporting regime, which may require adoption of new compliance measures. The new reporting regime may also have an impact on the active operation of new Korean hedge funds that were introduced in November 2011.
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