Korea Stock Exchange to Reduce Market Maker Obligations

Korea Exchange plans to reduce the obligation of market makers to mitigate the impact of short selling.


Korea Exchange plans to implement additional measures to mitigate the impact of short selling by reducing the obligations of market makers.

He announced on March 18 that the measures are aimed at preventing the disadvantage of market makers due to failure to meet the obligation in the process of reducing short sales. Specifically, the time and volume requirements and the bid-ask spread will be halved.

Market makers borrow stocks and set asking prices for both buy and sell for smooth trading. The work is carried out mainly by local institutional investors. Earlier, on March 13, the Financial Services Commission banned short selling for six months. However, some local institutional investors have been exempted from the temporary ban as market makers. Then some investors asked the commission to include market makers in the ban as well. For example, the Korea Stock Investors Association issued a statement to this effect on March 14.

Korea Exchange’s action is to adjust the duty of market makers in response to the call and not to take any disciplinary action against market makers who refrain from taking short positions. “In short, we have told local institutional investors that they are not required to do short sales as we will not have any non-market making issues resulting from non-short selling,” Korea explained. Exchange.


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