Short Selling in Korea: Rules After the 2025 Restart
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Short selling is legal again in Korea. A full ban began on 6 November 2023, and short selling resumed for all listed stocks on 31 March 2025. Only covered short selling is allowed, meaning you must borrow the shares before you sell. Naked short selling is illegal, and institutional short selling is now checked every day by the Korea Exchange’s central monitoring system. This guide sets out the rules as of October 2026: who can short and how, borrowing terms, the uptick rule, disclosure thresholds, penalties, and where to find the data.
In short
- Only covered (borrowed) short selling is allowed. Naked short selling, selling first and borrowing before settlement, is banned.
- The November 2023 ban was lifted on 31 March 2025 for all KOSPI, KOSDAQ and KONEX stocks. For shares outside the KOSPI 200 and KOSDAQ 150, it was the first time shorting was allowed in about five years.
- Stock borrowed for short selling must be repaid within 90 days, renewable up to 12 months in total. Cash collateral is 105% for both retail and institutional borrowers.
- Net short positions of 0.01% of a company’s shares (KRW 100 million minimum) or KRW 1 billion must be reported and are published by the exchange.
- Penalties now include fines of 4 to 6 times the illegal gain, prison terms of up to life for gains of KRW 5 billion or more, and trading bans of up to five years.
Is short selling allowed in Korea in 2026?
Yes. Since 31 March 2025, covered short selling has been permitted on all stocks listed on the Korea Exchange (KRX). Korea’s markets allow only borrowed short sales. The exchange defines naked short selling as selling shares you have neither owned nor borrowed and then borrowing them before settlement two business days later (T+2). That practice is prohibited.
Short selling is also possible on Nextrade, the alternative trading system that runs alongside the KRX, but only in its regular session (09:00–15:20 KST). Short orders are not accepted in Nextrade’s pre-market or after-market sessions. Short-order flagging and the overheated-stock rules apply there as well. See our market hours guide for the session times.
Why did Korea ban short selling from 2023 to 2025?
On 5 November 2023, the Financial Services Commission (FSC) decided to ban short selling of all KOSPI, KOSDAQ and KONEX stocks from the next day, 6 November, initially until the end of June 2024. It cited market volatility and a recently uncovered large-scale naked short selling case involving global investment banks. Market makers and liquidity providers stayed exempt.
In June 2024, the government extended the ban to 30 March 2025, so that institutions and the exchange had time to build electronic systems to prevent naked shorting. The National Assembly passed the supporting amendments to the Financial Investment Services and Capital Markets Act (FSCMA) on 26 September 2024. After testing, the FSC confirmed in March 2025 that short selling would fully resume on 31 March. For stocks outside the KOSPI 200 and KOSDAQ 150 (explained in our KOSPI vs KOSDAQ guide), the restart ended a pause that went back to March 2020.
How does Korea stop naked short selling now?
The FSC calls the current set-up a “triple prevention system”, made up of three layers.
- Institutional balance systems. Any corporate investor whose net short position in a stock reaches 0.01% or KRW 1 billion, plus every market maker and liquidity provider, must run a real-time in-house system. The system tracks borrowing, trades and corporate actions, works out how many shares can be sold, and blocks orders that exceed that number. Institutions without such a system can instead deposit borrowed shares with their broker before placing a short order.
- Broker checks. Every institutional or corporate short seller needs internal controls against naked shorting. Brokers must check each client’s systems and controls at least once a year, report to the Financial Supervisory Service (FSS), and accept short orders only from verified clients.
- NSDS at the exchange. The Naked Short-Selling Detecting System (NSDS) at the KRX receives institutions’ balance data and off-exchange transaction data. It matches them against every sell order, checking daily from trade date to settlement (T to T+2). Suspected cases are explained by the investor first, then reviewed further by the exchange, the FSS and the FSC.
Since 6 January 2025, firms in the large-position group have also needed a short-selling registration number from the FSS, which they quote to the exchange or broker when shorting. Failing the system or internal-control duties can bring a fine of up to KRW 100 million even when no naked short sale has occurred.
The KRX reported the first year’s results in March 2026. Between 31 March 2025 and 27 March 2026, the 24 institutions connected to NSDS accounted for KRW 264.2 trillion of the KRW 289.3 trillion of short selling (91.3%). The exchange referred 76 suspected breaches to regulators, covering naked short selling, order-flagging errors and uptick-rule breaches. It said most came from system errors or human error, and 52 of the cases involved less than KRW 100 million.
What are the borrowing, collateral and repayment rules?
Since 31 March 2025, institutions and retail investors borrow stock for short selling on the same terms. Each loan can run for up to 90 days and can be renewed, but the total cannot exceed 12 months. Breaking the repayment limit can bring a fine of up to KRW 100 million.
| Borrower | Cash collateral | KOSPI 200 stocks as collateral | Loan term |
|---|---|---|---|
| Institutional investors | 105% | 135% | 90 days per loan, 12 months maximum |
| Retail investors | 105% (cut from 120%) | 120% | 90 days per loan, 12 months maximum |
Two related restrictions also apply. Anyone who short-sells a stock after the company discloses a plan to issue convertible bonds (CBs) or bonds with warrants (BWs), and before the issue price is announced, cannot buy those bonds. Since April 2021, investors who short a stock ahead of a company’s share offering have also faced limits on buying into that offering.
What is Korea’s uptick rule?
A short sale order cannot be priced at or below the last traded price. It normally has to be at least one tick above it, and it may be placed at the last price only when that price was itself an uptick. On Nextrade, the reference is Nextrade’s own last trade.
Exemptions cover arbitrage and hedging: index and stock arbitrage, depositary-receipt arbitrage, ETF and ETN sales, ELW liquidity provision, and hedging by liquidity providers and market makers. In March 2021, the exemptions for market makers, liquidity providers and ETF/ETN arbitrage were narrowed.
Overheated-stock designation
Since 2017, the KRX has been able to designate a stock as “overheated” when short selling in it jumps suddenly. The tests look at the rise in short-selling value, the fall in the share price, and short selling’s share of total trading. Short selling in a designated stock is then banned on the next trading day, except for quotes and hedges by market makers and liquidity providers. Around the 2025 restart, the FSC ran the designation with expanded criteria until 31 May 2025.
When do short positions have to be reported and disclosed?
Since 1 December 2024, any investor whose net short position in a stock reaches 0.01% of its listed shares (ignoring positions under KRW 100 million), or KRW 1 billion in value, must report it and disclose it. The old public-disclosure threshold was 0.5%. The KRX publishes aggregated net short positions for each stock and the names of holders above the threshold. Short orders must also be flagged as short sales when entered.
What are the penalties for illegal short selling?
- Administrative fines. Since April 2021, fines for illegal short selling can reach the full value of the illegal short orders.
- Criminal fines. Since 31 March 2025, criminal fines are 4 to 6 times the illegal gain, up from 3 to 5 times.
- Prison terms by size of gain. At least 1 year for gains under KRW 500 million, at least 3 years for KRW 500 million to 5 billion, and 5 years to life for KRW 5 billion or more.
- Other sanctions (since 23 April 2025). Bans of up to five years on trading financial investment products and on serving as an executive of a listed company, plus six-month account payment freezes that can be extended by another six months.
Enforcement has continued since the restart. In January 2026, the Securities and Futures Commission fined six domestic and foreign asset managers and brokers a combined KRW 3.97 billion for naked short selling, mostly for trades found in a sweep of global banks before the restart. The largest fine, KRW 2.26 billion, went to Norway-based Pareto Securities for selling 178,879 Samsung Electronics shares it did not hold.
How can foreign investors and hedge funds short Korean stocks?
Foreign institutions short Korean shares through a Korean broker under the same rules as domestic institutions. The usual sequence is:
- Set up market access. Complete foreign investor registration and open trading and custody accounts. Our guide to buying Korean stocks walks through this.
- Choose a compliance route. Either build a real-time balance management system connected to NSDS (required once positions can reach 0.01% or KRW 1 billion, or for market makers), or use the “borrow-first” route of depositing borrowed shares with the broker before ordering. At the restart, the FSC’s tentative count was 21 institutions on the system route and 62 using borrow-first. Together they made up about 85.6% of pre-ban short-selling volume and were cleared to trade from day one. Institutions joining later must complete two weeks of NSDS verification and two weeks of simulation.
- Adopt internal controls and pass broker verification, which is repeated at least once a year.
- Borrow stock within the 90-day and 12-month limits, and post collateral.
- Flag each order as a short sale and track the 0.01% and KRW 1 billion disclosure thresholds.
The eight foreign firms connected to NSDS in its first year included JP Morgan, Goldman Sachs, Morgan Stanley and Merrill Lynch. Individual investors short through brokers’ retail stock-lending services, whose terms now match the institutional ones. Whether a broker offers these services to non-resident individuals is up to the broker. For how market access feeds into Korea’s index ambitions, see our MSCI guide.
Where can you find Korean short selling data?
- KRX Data Marketplace (data.krx.co.kr), under statistics, short selling: short volume and value by stock and their share of trading, net short balances, large-position disclosures and overheated-stock designations. Daily short-selling trading data are compiled after the close (8 p.m. KST) and released to all investors at the same time.
- Net short balances are aggregated from holders’ reports, so they are not real-time.
- Rule history: the KRX keeps a dated list of short-selling regulation changes in the same statistics section.
- Enforcement: sanctions are announced in FSC and FSS press releases.
Short-selling data are most useful next to flows and sentiment. Our foreign investor flows tracker and the K-Expectation Index cover those.
Short selling in Korea: timeline, 2008–2026
| Date | Event |
|---|---|
| 1 Oct 2008 | Short selling of all stocks banned during the global financial crisis |
| 1 Jun 2009 | Ban lifted for non-financial stocks; financial stocks stay banned |
| 10 Aug – 9 Nov 2011 | Ban on non-financial stocks temporarily reinstated (euro-area debt crisis) |
| 30 Aug 2012 | Short-balance reporting introduced |
| 14 Nov 2013 | Ban on financial stocks lifted |
| 30 Jun 2016 | Public disclosure of short positions of 0.5% or more begins |
| 27 Mar 2017 | Overheated-stock designation introduced |
| 16 Mar 2020 | All stocks banned (COVID-19), initially for six months, later extended |
| 6 Apr 2021 | Fines up to the value of illegal orders, criminal penalties and offering-participation limits take effect |
| 3 May 2021 | Partial restart: KOSPI 200 and KOSDAQ 150 stocks only |
| 6 Nov 2023 | Full ban on all listed stocks after naked short selling by global investment banks is uncovered |
| Jun 2024 | Ban extended to 30 March 2025; reform package announced |
| 26 Sep 2024 | National Assembly passes FSCMA amendments (penalties, systems, repayment limits) |
| 1 Dec 2024 | Disclosure threshold cut from 0.5% to 0.01% or KRW 1 billion |
| 6 Jan 2025 | FSS begins issuing short-selling registration numbers |
| 31 Mar 2025 | Full restart on all stocks; NSDS goes live; 90-day/12-month loans and 105% collateral |
| 23 Apr 2025 | Trading bans, executive bans and account freezes take effect |
| 31 May 2025 | Expanded overheated-stock criteria end |
| Jan 2026 | Six firms fined KRW 3.97 billion for naked short selling |
| 30 Mar 2026 | KRX reports NSDS first year: 76 suspected breaches referred to regulators |
Note: This guide reflects rules and announcements up to 15 October 2026. Korea has changed its short-selling rules often, usually by enforcement decree or exchange regulation, so check the FSC and KRX for later changes before trading. Nothing here is a recommendation to short or buy any security.
Frequently asked questions
When did Korea lift its short selling ban?
Short selling fully resumed on 31 March 2025 for all stocks listed on the Korea Exchange, ending a ban that began on 6 November 2023. Stocks outside the KOSPI 200 and KOSDAQ 150 had not been open to short selling since March 2020.
Is naked short selling legal in Korea?
No. Only covered short selling is allowed, so the seller must borrow the shares before selling. Since March 2025, institutional orders are checked against reported balances by the exchange's NSDS, and violations can bring fines up to the value of the illegal orders and prison terms.
How long can you hold a short position in Korea?
Stock borrowed for short selling must be repaid within 90 days per loan, renewable up to 12 months in total. The same limit applies to institutional and retail borrowers since 31 March 2025.
Who has to disclose short positions in Korean stocks?
Since 1 December 2024, any investor whose net short position in a stock reaches 0.01% of its listed shares (with a KRW 100 million minimum) or KRW 1 billion must report it. The Korea Exchange publishes the holder's name and aggregated balances.
Can short selling be done on Nextrade?
Yes, but only during Nextrade's regular session (09:00 to 15:20 KST). Short orders are not accepted in its pre-market or after-market sessions, and the uptick rule uses Nextrade's own last trade price.
Last reviewed: October 15, 2026.
Sources
- Stock Short Selling to be Fully Reinstated from March 31, Financial Services Commission, March 24, 2025
- Revisions to FSCMA Expected to Bring About Major Improvements to Short Sale Regulations, Financial Services Commission, September 26, 2024
- 근본적 공매도 제도개선을 위한 자본시장법 개정 (FSCMA amendment for short-selling reform passes National Assembly), Financial Services Commission, September 27, 2024
- FSC Decides to Ban Stock Short Selling Until June 2024 and Seek Measures to Improve the System, Financial Services Commission, November 5, 2023
- 금융위 “무차입 공매도 3중 방지체계 통해 공정하고 투명한 시장질서 유지” (FSC on the triple naked-short-selling prevention system), Korea Policy Briefing / FSC, April 6, 2026
- 넥스트레이드 다자간매매체결회사 본인가, 3월 4일 대체거래소 출범 예정 (Nextrade final approval), Financial Services Commission, February 5, 2025
- 공매도 규제연혁 (Short selling regulation history), Korea Exchange Data Marketplace, accessed October 2026
- 공매도 Q&A (Short selling Q&A), Korea Exchange Data Marketplace, accessed October 2026
- 공매도 중앙점검시스템 1주년…불법거래 76건 금융당국 통보 (NSDS first year: 76 cases referred), Newspim, March 30, 2026
- Korea Times: 6 firms fined $2.7mn over naked short selling, Finadium, January 20, 2026
- South Korea – Short Selling: Where Are We Now?, aosphere, March 25, 2025
- Recent trends and issues in the Korean short sale regime, Kim & Chang via IFLR, September 24, 2024
- Plan to Improve Regulations on Short Selling, Financial Services Commission, November 13, 2013
- Short Selling to Resume for KOSPI 200 and KOSDAQ 150 Stocks from May 3, Financial Services Commission, April 29, 2021
- 금융위, 16일부터 6개월간 공매도 전면 금지 (FSC bans short selling for six months from March 16), Newsis, March 13, 2020
This guide explains how the Korean market works for general information. It is not investment, legal or tax advice; rules change, so check the official sources listed above or a qualified adviser before acting.