Korea Exchange Revamps Unhealthy Order Monitoring... Establishes Voluntary Prevention System for Member Firms

Assigning Primary Role in Preventive Activities to Members... Establishing an Efficient and Sophisticated Monitoring System

Korea Exchange Seoul Headquarters Building Exterior View

[Asia Economy Reporter Gong Byung-sun] The Korea Exchange announced that it has established a voluntary prevention system for its members through the restructuring of its unfair trading monitoring system.

On the 11th, the Market Surveillance Committee (MSC) of the Korea Exchange announced that on November 18 last year, it finalized the "Plan to Restructure the Unhealthy Order Monitoring System" to strengthen the autonomous regulatory role of members. This aims to enhance the soundness of the capital market and strengthen investor protection by encouraging market participants to actively engage in unfair trading monitoring and prevention activities on their own.

The MSC assigned the primary role of prevention activities to its members. To this end, it activated responses to inquiries regarding the judgment of unhealthy orders related to monitoring activities and developed a system that allows all members to share reasons for exclusion from individual monitoring measures. Additionally, member companies that actively carried out monitoring were granted immunity from supervision and sanctions.

Monitoring efficiency was also improved. The system was reorganized to focus monitoring on areas requiring high inspection needs, such as accounts repeatedly flagged in monitoring and accounts refusing custody. Accordingly, the MSC granted members discretion to decide whether to take action on one-time or small-scale flags considering all circumstances, while encouraging active measures in repeated cases. Furthermore, simplified self-inspections under member responsibility were permitted for representative investor-named accounts excessively flagged despite normal transactions.

Efforts were made to establish a sophisticated monitoring system. This was to strengthen responses to changes in the market environment and recent patterns of unhealthy orders. Considering market environment changes such as increased transaction volume, the criteria for monitoring flags, including amount and quantity requirements, were raised. In addition, criteria suitable for detecting new complex types of unhealthy orders were also prepared.

A Korea Exchange MSC official stated, “We formed a task force (TF) with member companies to restructure the monitoring system, thereby motivating members and enhancing the acceptance of autonomous regulation. We will continue to improve monitoring and prevention activities to enable effective autonomous regulation in response to changes in the market environment.”

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