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Amendments of Enforcement Rules regarding Overheated Short-selling and Abnormal Price Soaring Issues Ⅰ Overheated Short-selling Issues Designation of overheated short-selling issues (KOSPI/KOSDAQ/KONEX Market) <Process> T+0 T+1 (after 18:00) •Detects and discloses overheated short- T+2 •Prohibits short-selling •Lifts a ban on short- of designated issues selling of the issues selling issues ◦ (Criteria) Issues will be detected when all of the following conditions are met. ① (Short-selling ratio*) KOSPI: 20% or above/ KOSDAQ, KONEX: 15% or above * Trading value via short-selling of the day / Total trading value of the day ② (Increase rate of short-selling) Short-selling ratio of the day(①) lies at or above double of the average of short-selling ratio over the most recent 40 trading days ③ (Price change) Closing price of the day drops 5% or more compared to that of the previous day ※ A simulation conducted by KRX detected 37 and 30 issues from KOSPI and KOSDAQ Markets respectively in 2016. ◦ (Regulation) Detected issues will be designated as overheated short-selling issues and short-selling of those issues will be prohibited for one day on next trading day. ◦ (Exception) ① Liquidity Provider (LP) quotations and Market Maker (MM) quotations on stock markets, ② Hedging quotations for a liquidity providing on ELWs, ETFs, ETNs, ③ Hedging quotations for a market making on derivatives market. II Issues with abnormally soaring prices Periodic call auction will be implemented on issues with abnormally soaring prices* (KOSPI/KOSDAQ/KONEX Market). * Refer to Market Oversight Regulation Article 11. ◦ When the Market Oversight Commission requests a change of trade execution methods for issues with abnormally soaring prices, such as a theme stock*, 30-minute periodic call auction, instead of continuous call auction, will be implemented for 3 days for the designated issues. * A stock experiencing price swings in relation to a certain subject or theme such as political, economic or social trends. ◦ If the price keeps skyrocketing, the periodic call auction can be extended for another 10 days or longer. ◦ Additional market measures* can be applied if the periodic call auction measure does not mitigate the abnormal price soaring. * Price limit change, VI criteria change, or other measures if necessary. III Effective Date Designation of overheated short-selling issues : 27th March 2017 ◦ Strengthening penalties against violators of short-selling rules : 27th March 2017 Periodic call auction for issues with abnormally soaring prices: 13th March 2017 [Contact] Global Marketing, KOSPI Market Division Tel: +82.2.3774.4514, E-mail:[email protected] [About KRX ] Korea Exchange (KRX) is the operator of Korea’s securities and derivatives markets under the ‘Financial Investment Services and Capital Markets Act (FSCMA).’ KRX operates four markets; KOSPI Market as a main board, KOSDAQ Market as a venue to small and medium sized enterprises, KONEX Market for start-up venture companies and Derivatives Market which boasts of the most liquid products in the world. Within its consolidated trading platform, KRX offers a vast product line-up including equity shares, bonds, ETFs, ETNs, ELWs, commodities, futures and options. For more information, please visit our website at http://global.krx.co.kr. [Disclaimer] The data and information contained in this document are provided for informational purposes only. In cases where any differences occur between the English version and the Current Korean version, the Korean version shall prevail. The Korea Exchange should not be held liable for any unintentional errors or omissions in the content not for loss or damage incurred as a result of the use of the information contained in this document.