The Financial Supervisory Service to Conduct Comprehensive Inspection of Korea Exchange Early Next Year... First Time Since 2010

[Asia Economy Reporter Ji-hwan Park] The Financial Supervisory Service (FSS) is expected to commence a comprehensive inspection of the Korea Exchange (KRX) early next year. It is anticipated to be a broad examination covering overall operations, including the recently controversial market maker system.

According to financial authorities on the 21st, the Financial Services Commission (FSC) and the Financial Supervisory Service are considering conducting a comprehensive inspection of the exchange early next year. The financial authorities have reportedly concluded that there is a need to review the entire system, as various issues have emerged regarding the market maker system currently operated by the exchange.

The market maker system refers to presenting both buy and sell quotes for stocks with sluggish trading to help investors trade smoothly. It increases trading volume and prevents sudden price fluctuations. Market makers are allowed short selling to hedge losses incurred in this process and are exempt from the uptick rule. In particular, some individual investors suspect that arbitrary quote submissions have caused the prices of certain hot stocks to fall.

However, the timing of the comprehensive inspection is flexible. Considering the prolonged COVID-19 pandemic, which makes large-scale manpower deployment difficult, the schedule must be adjusted flexibly.

FSS Governor Seok-heon Yoon also mentioned the need for a comprehensive inspection of the exchange during the National Assembly audit in October. In response to a question from Assemblyman Yudong-su of the Democratic Party asking, "Isn't a comprehensive inspection of the exchange necessary?" he said, "We will consider it positively." Governor Yoon stated, "The exchange is the flower of the capital market, and the development of the exchange is linked to the development of the financial market," adding, "I have thought that a comprehensive inspection is necessary due to recent various issues."

Although the exchange was released from public institution status in 2015, it is a quasi-governmental organization entrusted by the government to perform tasks such as establishing and operating the stock market, developing and calculating various indices, listing and delisting companies, and market surveillance. The FSS can inspect the exchange upon request from the FSC. While the exchange has undergone partial inspections due to IT incidents, the last comprehensive inspection of its overall operations was in 2010.

This content was produced with the assistance of AI translation services.