Introduction of Improved Designation Rules of Overheated

Short-selling Issues to be Implemented

□ (Overview) (KRX) updated overheated short-selling rules and systems, and it will implement the updated rules from September 25th, 2017. * This is based on the “Rules on Overheated Short Sale Issues to be amended,” released on August 24, 2017 by Financial Services Commission. (Available in Korean only)

□ (Key Changes) Amending criteria for designating overheated short-selling issues to designate such issues in a timely manner, and prohibiting short-selling of the detected issues on the following day as same as the existing rules.

ㅇ Amendments of criteria of overheated short-selling of KOSPI market

- (As is) An issue is designated as an overheated short-selling issue if it meets all three conditions : short-selling ratio 20% or higher + price falling rate 5% or higher+ increase rate of short-selling ratio two folds or more.

- (To be) An issue will be designated as an overheated short-selling issue if it meets any of the two conditions below.

(i) Short-selling ratio 18% or higher* + price falling rate from 5% to under 10% + increase rate of short-selling transaction value six folds or more. * Criterion of short-selling ratio is three times of the latest quarter’s short-selling ratio of KOSPI market, and will be revised every end of quarter. (Upper limit : 20%)

(ii) Price falling rate 10% or higher + increase rate of short-selling transaction value six folds or more.

ㅇ Amendments of criteria of overheated short-selling of KOSDAQ and KONEX market

- (As is) An issue is designated as an overheated short-selling issue if it meets all three conditions : short-selling ratio 15% or higher + price falling rate over 5% or higher + increase rate of short-selling ratio two folds or more.

- (To be) An issue is to be designated as an overheated short-selling issue if it meets any of the conditions below.

(i) Short-selling ratio 12% or higher* + price falling rate from 5% to under 10% + increase rate of short-selling transaction value five folds or more * Criterion of short-selling ratio is three times of the latest quarter’s short-selling ratio of KOSDAQ 150, and will be revised every end of quarter. (Upper limit : 20%)

(ii) Price fall rate 10% or higher + increase rate of short-selling transaction value five folds or more

(iii) Increase rate of short-selling transaction value five folds or more + Average short- selling ratio over the past recent 40 trading days 5% or higher (applied to KOSDAQ market only)

Short- Increase rate of Avg. short- Price falling selling short-selling selling ratio over Market Type rate of the Remarks ratio of transaction the past recent day the day value 40 trading days

18% or From 5% to 1 - - higher* under 10% Six folds or KOSPI 10% or more 2 - - - higher

12% or From 5% to 1 - - higher* under 10%

KOSDAQ 10% or Five folds or 2 - - - KONEX higher more

Only for 3 - - 5% or higher KOSDAQ

* Threshold ratio of short-selling of the day is three times the latest quarter’s short-selling ratio of KOSPI (KOSDAQ 150) , and will be revised at the end of every quarter. (Upper limit : 20%)

□ (Remarks) Based upon the updated criteria, overheated short-selling issues will be detected from September 25th, 2017. If an issue meets the conditions above, short- selling of the issue will be prohibited on the following day.

ㅇ For the lists of overheated short-selling issues, please refer to global.krx.co.kr > Marketdata >Market Status >Short Selling >Overheated short-selling issue (Screen number 89010)

[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.

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