Financial Supervisory Commission (FSC) Vice Chairman Kim So-young speaks during a press briefing held at the Government Complex in Seoul, Thursday. Courtesy of FSC

Korea's financial authorities have decided to extend the implementation of a short selling ban, originally scheduled to end by the end of this month, until March 30, 2025.

The Financial Services Commission (FSC), the country's top financial regulator, announced Thursday afternoon that the additional extension was necessary to set up a central computerized system that can monitor and prevent naked short selling practices.

"The FSC has determined to extend the short selling ban until March 30 next year in order to resolve market concerns over hindrances of fair price formation by establishing a short selling computer system," FSC Vice Chairman Kim So-young said during a press briefing on Thursday.

Explaining the reasons behind the decision, Kim said, "If short selling practices were to resume (as scheduled by the end of this month) without completing the short selling computer system, there is a high risk of large-scale illegal short selling recurring."

The financial authorities aims to complete the establishment of the computerized short selling monitoring system by the end of next March.

Later this year, the FSC plans to provide guidelines to facilitate institutional investors in preemptively blocking naked short selling through internal balance management systems.

Additionally, the Korea Exchange (KRX), the state-run bourse operator, plans to establish a "Naked Short-Selling Detecting System" (NSDS) by the end of March next year to cross-check and verify institutional investors' balances and off-exchange trading information.

Financial Services Commission Chairman Kim Joo-hyun, second from left, speaks as Financial Supervisory Service Governor Lee Bok-hyun, third from left, ruling People Power Party floor leader Rep. Choo Kyung-ho, left, and other participants listen during a meeting among financial officials and senior PPP lawmakers on the short selling ban at the National Assembly in Yeouido, Seoul, Thursday. Yonhap

Earlier in the day, the government and the ruling People Power Party (PPP) agreed to completely lift the ban on short selling in March next year.

The PPP said its floor leader Rep. Choo Kyung-ho talked with the heads of the FSC, the Financial Supervisory Service (FSS) and the KRX to share thoughts on rules for short selling during their joint meeting at the National Assembly in Yeouido, Seoul, Thursday morning.

"The meeting focused on possible measures to make improvements concerning short selling, and the attendants accordingly discussed the appropriate time to resume such trading," PPP chief policymaker Rep. Jeong Jeom-sig said.

A risk-hedging strategy using borrowed stocks, short selling was banned in November 2023 by the FSC to protect retail investors and crack down on global investment banks' illegal market practices, such as price manipulation.

The ban on short selling was originally to last for eight months and therefore was set to expire this month. But it was extended until next March "to gain sufficient time to make up for any shortcomings and fully prepare for fair trading," according to the FSC and the PPP.