Short Selling: The Ban, Its Lifting and the Rules
Korea banned all short selling from November 2023 and lifted the ban on March 31, 2025; you must borrow the shares before shorting, and a short sale can't be priced below the last trade.
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Text version · Korea Stock Rules, lesson 6: “Short Selling: The Ban, Its Lifting and the Rules”
Korea banned all short selling from November 2023 and lifted the ban on March 31, 2025; you must borrow the shares before shorting, and a short sale can't be priced below the last trade.
Short selling: borrow to sell, bet on a fall
short means borrowing shares and selling them first, then buying back after the price falls to return them, pocketing the difference; if the price keeps rising, the loss is in theory unlimited.
Banned for over a year, resumed in 2025
Korea banned all short selling from November 6, 2023; it resumed on March 31, 2025, with tighter monitoring of illegal short selling.
Two hard rules
First, naked short selling is banned: you must borrow the shares first. Second, the uptick rule: a short sale can't be priced below the last trade. Individual investors can borrow shares to short too, but collateral and terms are set by the broker.
Key takeaways
- Short selling means borrowing shares to sell now and buying them back later to return them, betting the price will fall; if the price rises, the loss is in theory unlimited.
- Korea banned all short selling from November 6, 2023 and resumed it on March 31, 2025.
- You must borrow the shares before shorting, and naked short selling is illegal; a short sale can't be priced below the last trade (the quoting rule).
- Individual investors can also borrow shares to short, but collateral ratios, borrowing terms and fees are set by brokers.
Try it yourself
You can do these exercises in this lesson's interactive simulation:
- Keep “June 2025” and a quote one tick higher, then press ▶: does the short order fill? How much did it make in the end?
- Switch to “June 2024” and play: where does it get stuck? Why?
- Set the quote equal to the last trade price: can you sell if the last trade was down? What if it was up?
- Set the buy-back price to ₩55,000: what happens to the short?
Quiz and explanations
- 1. When did Korea resume short selling?
- Answer: March 31, 2025.All short selling was banned from November 6, 2023 and resumed on March 31, 2025.
- 2. Selling shares you neither own nor have borrowed is, in Korea…
- Answer: Naked short selling, which is banned.Korea only allows short selling after borrowing the shares; naked short selling is illegal.
- 3. The last trade was ₩50,000 and it was a down tick. Which short-sale quote meets the quoting rule?
- Answer: ₩50,100.A short sale can't be priced below the last trade, and after a down tick it can't be priced at the last trade either, so only ₩50,100 qualifies.
Terms in this lesson
- borrowing shares (Borrow): Before shorting, you borrow shares from your broker, and you must eventually buy back the same number to return them.
- naked short selling (Naked Short Selling): Selling shares you neither own nor have borrowed first. Korea and most markets ban it and only allow short selling after borrowing the shares.
- short (Short): Borrow and sell first, then buy back to return it, betting the price will fall.
- uptick rule (Uptick Rule): A rule limiting short-sale prices: a short sale can't be priced below the last trade, so short orders can't keep pushing the price down.