Limit to short sale

Short sale refers to the sale of listed securities that are neither owned nor borrowed. The sale of listed securities that are not possessed is prohibited to stabilize settlement. Note, however, that short sale is allowed under any of the following cases since they are not considered to be short sale:

  • The sale is carried out prior to the date of settlement within the corresponding number of listed securities for which the purchase contract was signed in the market.
  • Shares are sold through the exercise of right with conversion bond/exchange bond/bond with warrant, etc., paid-in-capital increase, increase in capital stock without consideration, dividend of share, etc.; the corresponding securities can be settled as they are listed.
  • The settlement can be made by the date of settlement under any of the following cases:
    • Sale of listed securities that have been kept in other securities depositories or verified to be owned in other ways
    • Sale of ETF to be received upon additional issuance
    • Sale of listed securities to be received upon the request for resale of ETF
    • Sale of listed securities to be acquired upon the termination of the depositary contract pursuant to entrusted securities
    • Sale of listed securities confirmed to be returned among the listed securities that have been leased
    • Sale of listed securities that will be delivered through off-board transactions and contract
    • Sale of listed entrusted securities to be deposited and acquired
    • Sale during regular trading hours within the corresponding scope of quantity after the agreement with the truster (consignor) to buy after trading hours
Limit to the bid price for covered short selling
The bid price for covered short selling must be higher than the present price to prevent the share price from plummeting as a result of covered short selling. Note however, that the present price can be used as bid price if the present price is propelled upward. Nonetheless, no price cap is imposed for index arbitrage, stock arbitrage, ETF arbitrage, depositary receipt arbitrage, ETF sale, and share liquidity provision when the supplier of liquidity of share warrant/ETF and market organizer of derivative commodities sell the basic stock certificate to hedge the risk.