Korea Suspends 140% Margin-Loan Rule for 3 Months After KOSPI Rout

South Korea suspended a collateral rule that can force the sale of shares bought with borrowed money, and promised further steps if needed, after the KOSPI fell more than 8% shortly after the opening bell on Nov. 6, 2026. The plunge followed a Wall Street sell-off driven by fears that a Democratic Congress, after the party's Nov. 3 midterm landslide, could curb AI data centers.

At a joint market review meeting at 10:30 a.m., authorities agreed to waive for three months, from Nov. 9, the requirement that brokerages keep collateral worth at least 140% of their margin loans, the Financial Services Commission (FSC) said. Deputy Prime Minister and Finance and Economy Minister Lee Hyoung-il chaired the meeting at the Government Complex Seoul.

The KOSPI closed 6.02% lower at 5,059.69, its second straight loss of more than 5%, after a circuit breaker halted trading for 20 minutes. Won amounts in this article are converted at ₩1,356.6 per dollar, the Seoul closing rate at 3:30 p.m. on Nov. 6, 2026.

"Relevant authorities will proactively prepare and implement timely, necessary measures to prevent Korean stocks from overreacting relative to the country's economic fundamentals," Lee said, as translated by the Korea JoongAng Daily.

The Margin-Loan Relief

Lee first made the pledge on the morning of Nov. 6 at a regular meeting of economic ministers, the 276th of its kind. The Asia Business Daily published his remarks at 8:58 a.m., before the market opened.

"Our economy has never been on firmer ground, and experts see no sign of a slowdown in AI investment," Lee said, as translated by the Korea JoongAng Daily.

The 10:30 a.m. meeting brought in FSC Chairman Lee Eog-weon, Financial Supervisory Service Governor Lee Chan-jin and Bank of Korea Senior Deputy Governor Kwon Min-soo, according to the FSC. Participants said the domestic market was reacting excessively to outside factors, citing expected growth in the mid-3% range for 2026, exports reaching $1 trillion and corporate operating profit forecast to top ₩900 trillion ($663 billion).

The waiver is meant to keep excessive forced selling from amplifying volatility as share prices plunge, the FSC said in its Korean-language release.

Korea context: Korean brokerages lend investors money to buy shares, and those margin loans must stay backed by collateral worth at least 140% of the amount lent. When falling prices push an account below that line, investors who cannot top it up risk having their shares sold, a practice known locally as bandae maemae, or forced liquidation. Margin loans on the KOSPI and KOSDAQ totaled ₩28.6 trillion ($21.1 billion) on Nov. 4, 2026, the lowest in about three months, the Seoul Economic Daily reported.

Korea has used the same tool before. On March 13, 2020, as Covid-19 hit markets, the government lifted the minimum collateral requirement and limits on share buybacks, and banned short selling for six months from March 16, 2020, the FSC said at the time. All three measures were later extended to March 15, 2021.

The Tools in Reserve

The FSC said authorities would prepare additional steps if volatility widens further, without naming them. Investors were watching for two heavier tools, a stock market stabilization fund and a temporary short-selling ban, the Seoul Economic Daily reported on Nov. 6.

Lee had kept the door open before. Speaking in Bangkok on Oct. 16, 2026, he said the government was preparing market stabilization measures for use if volatility rose, without saying which ones or when, the Seoul Economic Daily reported.

A stabilization fund pools money from financial firms to buy shares. Korea first set one up in 1990 and put money to work during the 2003 credit card crisis and the 2008 global financial crisis, the Seoul Economic Daily reported. The 2008 injection was ₩515 billion ($380 million), according to the Korea Economic Daily.

On March 24, 2020, the FSC announced a ₩10.7 trillion ($7.9 billion) fund backed by five financial holding companies, 18 financial firms and other institutions. It was to invest in the KOSPI 200 index through capital calls, starting with about ₩3 trillion ($2.2 billion).

That fund was never deployed. In January 2021, the FSC said using it had not been appropriate while share prices kept rising to record highs. Hana Securities said in August 2026 that an official mention of a fund alone could steady sentiment, whether or not it is activated, the Korea Economic Daily reported.

Size is a limit. Foreign investors sold a net ₩9.41 trillion ($6.9 billion) of KOSPI shares in the five sessions to Nov. 5, 2026, the Seoul Economic Daily reported, equal to 88% of the entire 2020 fund.

Short-selling bans are the other heavy tool. The FSC banned short selling on all listed stocks from Nov. 6, 2023, initially through June 2024, after repeated cases of illegal naked short selling by foreign and institutional investors. Full short selling did not resume until March 31, 2025.

The rally that ban set off was brief. On its first day, the KOSPI rose 5.66%, a record one-day gain of 134.03 points, the Korea JoongAng Daily reported. The next day it fell 2.33% to 2,443.96, according to the Asia Business Daily.

Regulators also run a standing program. On March 4, 2026, FSC Chairman Lee Eog-weon ordered officials to make active use of a market stabilization program worth more than ₩100 trillion ($73.7 billion), already in operation, if markets turned excessively volatile, Edaily reported.

The MSCI Constraint

A new short-selling ban would cut against Korea's bid for developed-market status from index provider MSCI. On June 23, 2026, MSCI again left Korea off its watch list for a possible upgrade, the Asia Business Daily reported.

MSCI cited the operational burden of the new market surveillance rules that came with the return of short selling, along with the won's lack of offshore delivery, according to the same report. Industry officials see June 2027 as the next chance to rejoin the watch list, if Korea completes its currency and capital market reforms by early 2027, the Seoul Economic Daily reported.

Pressure for a ban is building anyway. Short-sale balances on Samsung Electronics and SK hynix rose 69.9% in the two weeks to Nov. 3, 2026, and the pickup has revived calls among retail investors for another ban, the Seoul Economic Daily reported.

For foreign funds, a ban would also remove a way to hedge Korean holdings, while margin relief and a stabilization fund leave trading rules as they are. Our guide on how to buy Korean stocks from abroad covers the rules that apply to investors outside Korea.

What to Watch

The margin waiver takes effect on Nov. 9, 2026, and runs for three months. "We will monitor the chip industry, policy developments in major economies and cross-border capital flows to contain any further market instability," the authorities said, as translated by the Korea JoongAng Daily.

The clearest sign of escalation would be an FSC press release calling for contributions to a stabilization fund, as in March 2020. Until then, the government's words and its money are separate signals.

Taken together, Seoul has so far used its lightest tool, while the heavier ones carry costs, from a fund barely larger than a week of foreign selling to MSCI's doubts; the first test comes on Nov. 9, 2026, when the margin waiver takes effect.