"Even with Concentrated Minority Branch Transactions, No Designation as Investment Warning Item"... Exchange Revises Requirements

Increase in Minority Account Trading Concentration and Stricter Criteria for Excessive Involvement in Specific Account Transactions

[Asia Economy Reporter Minwoo Lee] The Korea Exchange (KRX) is revising the criteria for designating investment caution stocks. Going forward, stocks will not be designated as investment caution stocks even if trading is concentrated in a few branches. The criteria will also be raised when trading is concentrated in a small number of accounts.

The Korea Exchange announced on the 21st that it will implement these revisions to the investment caution stock designation criteria starting from the 27th. The designation of investment caution stocks is the first stage of the market warning system. Stocks that have a high likelihood of unfair trading, such as concentrated trading in a few accounts or rapid price fluctuations, are designated.

According to this revision, the requirement for concentration of trading in a few branches will be abolished. Previously, the criteria required a price increase (or decrease) rate of 15% or more over three days, and a purchase (or sale) involvement rate of 20% or more at a specific branch, or 40% or more among the top five branches. This requirement has become ineffective due to the decrease in face-to-face trading and the increase in online and non-face-to-face accounts and branches.

In the criteria for designating investment caution stocks during rapid market changes, the price fluctuation standards for 'concentration of trading in a few accounts' and 'excessive trading involvement by specific account(s)' will also be raised. When the market indices such as KOSPI and KOSDAQ fluctuate by ±8% or more over three days (+8% or more for excessive trading involvement), the price fluctuation standard will be raised from 15% to 25%. However, if the market index fluctuates less than ±8% over three days, the current 15% price fluctuation standard will apply.

This aims to reflect market volatility in the designation criteria, preventing excessive designations by designating stocks with high volatility during rapid market changes as investment caution stocks, thereby effectively achieving the goal of alerting investors.

A KRX official stated, "By reflecting recent changes in the market environment, we will enhance the significance and efficiency of the market warning system, contributing to investor protection and the prevention of unfair trading in advance." He added, "We plan to continuously improve the system by reflecting changes in the securities market and evolving unfair trading patterns to alert investors about abnormal trading stocks."

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