Korea Exchange Detects 76 Suspected Short Selling Violations, Reports to Financial Authorities

Continuous Monitoring Network Covers 91%

Shift from Post-Trade Correction to Preemptive Prevention

Process Improvements and Enhanced Internal Controls

On March 30, the Korea Exchange announced that it had identified 76 suspected violations related to short selling through the operation of the centralized short selling monitoring system (NSDS) and reported them to the financial authorities.

On the 30th, the KOSPI index fell sharply by over 4% in early trading, dropping below the 5200 mark, amid a surge in international oil prices due to uncertainties surrounding the Middle East war. The current status of the domestic stock market was displayed on the electronic board in the dealing room of Hana Bank in Jung-gu, Seoul. On the same day, the won-dollar exchange rate started trading at 1513.4 won, up 4.5 won from the previous trading day. Photo by Kang Jinhyung, March 30, 2026.

Over the past year, 24 major domestic and foreign institutional investors participated in the NSDS. The "short selling digitalization system," which continuously monitors approximately 91.3% of all short selling transaction amounts, has been successfully established. The system monitored about 15 million sell orders per day on average from participating institutions.

Previously, short selling surveillance was conducted monthly on a post-correction basis, focusing on transactions where settlement quantity shortages and other issues occurred. However, since the introduction of the NSDS, the system now conducts daily, comprehensive, preemptive checks on all sell orders.

The NSDS detected potentially illegal short selling activities at an early stage, proactively preventing them from escalating into large-scale violations. In fact, 68.4% (52 cases) of the suspected violations involved small amounts of less than 100 million won.

The main causes of the suspected violations were found to be system errors or human errors within the institutions themselves. The Korea Exchange has completed process improvement measures for those institutions to prevent recurrence.

With the successful implementation of the NSDS, the Korea Exchange plans to enhance the efficiency of regulatory operations. As the continuous monitoring system is now in place, the regular monthly audit cycle for participating institutions will be changed to a quarterly cycle, thereby easing the practical regulatory burden.

Even during recent periods of sharp market declines caused by external factors such as the U.S.-Iran war, the proportion of short selling remained at around 3%, and no illegal activities were detected. The Korea Exchange explained that it is closely monitoring the balance reports submitted by institutional investors and the potential occurrence of illegal short selling in response to rapidly changing market conditions.

The Korea Exchange stated, "We plan to structurally eradicate illegal short selling through the NSDS digitalized regulatory system, which enables early detection and active use of such results," adding, "After the initial stabilization phase of the NSDS, we will overhaul and improve the short selling management processes for institutional investors to further advance internal control systems."

This content was produced with the assistance of AI translation services.