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Japan FSA Plays it Safe with Continued Restrictions on Short Selling

Japan’s financial regulator has vowed to maintain a short selling ban on certain financial products as it aims to reduce market abuse and insider trading as the market continues to suffer in difficult trading conditions.  The following regulatory measures on short selling are currently in place, with regard to all listed stocks in Japan: 1) […]

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Japan’s financial regulator has vowed to maintain a short selling ban on certain financial products as it aims to reduce market abuse and insider trading as the market continues to suffer in difficult trading conditions. 

The following regulatory measures on short selling are currently in place, with regard to all listed stocks in Japan:

1) An “uptick rule requirement” which prohibits, in principle, short selling at the same as or prices lower than the latest market price;

2) Requirements for traders to verify and flag whether or not the transactions in question are short selling; and

3) Request the exchanges to make daily announcements on their aggregate price of short selling regarding all securities and aggregate price of short selling by sector (Announcements have been made sequentially since October 14, 2008).

In addition, the Financial Services Agency (FSA) has put in force the following measures, as temporary measures effective until October 31,2012

1) Naked short selling (short selling in which stocks are not borrowed at the time of selling) is prohibited (effective since October 30, 2008); and

2) Holders of a short position of a certain level or more (in principle, 0.25 percent or more of outstanding issued stocks) are required to report to exchanges through securities firms. Exchanges are required to publicly disclose such information (effective since November 7, 2008).

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1 Comment

  1. Jon

    It is very interesting that Japan, with all of its sophistication, would have such restrictions as if the market is still open outcry.

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