South Korea uncovers 76 suspicious short-selling trades undetected by firms
South Korea's financial watchdog has flagged dozens of suspicious short-selling trades in the past year. The Korea Exchange (KRX) detected 76 potential violations using its new real-time monitoring system. Despite this, none of the cases were spotted by the financial firms involved in the trades themselves. The KRX introduced a real-time surveillance system to track short-selling activity. Over the last 12 months, it processed an average of 15 million transactions daily. The total value of short sales during this period reached 289.3 trillion won.
Most of the trading—91.3%—came from 24 financial institutions participating in the National Securities Depository System (NSDS). Yet none of these firms reported the 76 suspected illegal trades identified by the KRX. Nearly 70% of the flagged cases involved sums under 100 million won ($65,823). Short-selling activity surged in early 2024. The daily average transaction value climbed from around 170 billion won in February to roughly 240 billion won in March. This spike coincided with extreme market swings, including a 12% single-day drop in the Kospi index.
The KRX's findings highlight gaps in self-reporting by financial institutions. With short-selling volumes rising and market volatility increasing, regulators may face pressure to tighten oversight. The system's first-year results suggest a need for stricter compliance checks.
