Why South Korea Banned Short Selling  and When Could Ban Be Lifted?

Short sellers are facing the heat in South Korea after regulators extended a ban on the practice of selling borrowed shares. Their goal is to stop big investment banks engaging in illicit trading practices that could erode public trust in markets. While South Korean shares rallied after the ban was imposed in November, the gains soon faded. Critics said it makes the market less transparent, and less attractive to global investors.

It’s a way to make money in a falling market. An investor borrows shares and sells them on, waits for the price to fall, buys the same number of shares at the lower price and hands them back to the lender. The investor pockets the price difference and the counterpart who lent them the shares takes a commission. It works as long as the shares fall. If they rise, the investor could lose money instead.