Capital Market Reform - Financial Services Commission

Capital Market Reform

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Requirement

Aug 01, 2024

Short Sale Reform Measures

The attached booklet outlines the government's comprehensive short sale reform measures intended to prevent illegal and unfair trading activities and ensure protection for investors. The Korean government has been working to improve regulations on short selling with goals to prevent illegal short sale activities and minimize their negative effects. Despite various efforts, large-scale naked short sale activities have been uncovered repeatedly, threatening to undermine fair price formation in the market. Against this backdrop, the government imposed a temporary short sale ban of all stocks effective initially from November 6, 2023 to June 30, 2024, and then extended the period of short sale ban until March 30, 2025. Meanwhile, the government and relevant authorities launched a taskforce and held a series of public discussions with various stakeholders to seek ways to bring about fundamental improvements to short sale regulations and market practices. After having a series of public discussions, it was found that foreign and institutional investors demand more regulatory clarity and predictability, while retail investors call for an electronic system that can thoroughly monitor short sale transactions and a limit on institutional investors stock repayment period. Also, since retail investors make up a large share in Korean stock market when compared to the situation in other countries, it is necessary for the financial authorities to help foreign investors better understand about this peculiar characteristic in Korean stock market, which demands more rigorous regulations for short sale activities. Against this backdrop, the government has drawn up plans to make fundamental improvements to shot sale regulations, which will help to prevent the potential of illegal short sale activities disrupting markets function of fair price formation. Please see the attached PDF for details.
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Aug 01, 2024

ATS Operation Plan

The attached booklet outlines Korea's efforts to introduce an alternative trading system (ATS) with aims to make qualitative improvements in domestic capital market infrastructures. With the introduction of an alternative trading system (ATS) operated by Nextrade from the first half of 2025, the Korean stock market will make a transition from a single-exchange market to a multiple-exchange and competition-based market system. In this regard, the financial authorities and related organizations will work to (a) provide a new stock trading experience unmatched to that of a single-exchange trading system, (b) ensure an integrated oversight for market management, supervision, and investor protection to be prepared for potential dispersion of liquidity resulting from making a transition to a multiple-exchange system, and (c) revamp relevant rules and regulations under the legal framework of the FSCMA to ensure seamless introduction and operation of an ATS. Please see the attached PDF for details.
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Aug 01, 2024

Corporate Value-up Plan

The attached booklet contains guidelines for corporate value-up plan intended to promote listed companies' voluntary efforts to boost valuations and enhance shareholder returns. It is of utmost importance that listed companies make efforts to enhance corporate value in order to address the Korea discount, which is the tendency of Korean stocks to be valued lower than international counterparts. Corporate value is defined as the aggregate value determined by considering the companys assets, future cash flow and other relevant factors. Corporate value is evaluated based on various aspects including management performance, growth potential, market conditions and social responsibilities. Comprehensive efforts are required to enhance corporate value, including efficient use of capital financed by the stock market, improving communication with the shareholders, and increasing shareholder returns. The Corporate Value-up Plan is a voluntary development strategy that listed companies formulate to enhance their value. When companies develop a meaningful Corporate Value-up Plan and engage in active communication of the plan with the market based on their plans, it will facilitate proper valuation from the investors, in turn leading to smoother financing for the companies. The establishment of such virtuous cycle in the capital market will bring about a win-win effect for the companies, investors and the market, thus enabling Korean listed companies and the entire stock market to recognize their fair value. Please see the attached PDF for details.
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Sep 11, 2023

Capital Market Reforms in Korea

The attached booklet outlines recent capital market reform initiatives undertaken by the government of the Republic of Korea. Capital market is at the core of a virtuous cycle of economic growth. It provides funds needed for the growth of our economy and businesses and returns the benefit of the growth to investors so that they can reinvest their profits back in the market. Since taking the office, the Yoon Suk Yeol administration has been very serious about making improvements to the capital market system in Korea, aiming to alleviate the so-called 'Korea discount'the persistent undervaluation of Korean stocksand to update capital market regulations to make them more consistent with global standards and supportive for economic growth. Over the past year, the FSCin close coordination with relevant institutions and the industryhas pushed forward with capital market reforms and made notable progress in three important areas: (i) embracing global standards and innovation; (ii) enhancing investor protection and market fairness; and (iii) ensuring financial stability. With the progress we have made so far and our continuous reform efforts going forward, the government expects that our capital market will be able to better serve and function as a key pillar of our economy. Please see the attached PDF for details.
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