Short sale is one of the most popular investment strategies used in particular on the stock market. It is a simple investment strategy: it offers gains at a time when share prices fall but it does not require more advanced instruments like derivatives. Short sale is also used as a part of complex strategies, for instance arbitrage strategies using derivatives and shares. With its specificity, it contributes to the quality and attractiveness of the market and makes it more effective. It improves market liquidity (through securities lending and short selling, shares in investment portfolios of long-term investors "return" to the market and increase the number of shares in trading) and mitigates the risk of overvaluation of securities.
The KDPW Rules set out the principles of limiting the availability of short sale transactions and imposing adequate disciplinary measures if settlement suspension limits set as a percentage of trading in securities approved for short sale are exceeded.
KDPW has developed solutions which will properly limit settlement risk in order to ensure the safety of the instrument and introduced disciplinary measures in the form of additional special fees for participants who exceed suspension limits.
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Last modified:28-12-2011
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