'Debt Battle' Tribe Takes a Breather... Securities Firms Successively Ease Forced Sell-offs

Mirae Asset Securities Lowers Margin Maintenance Ratio to 130% from 11th
First Major Securities Firm to Ease Collateral Ratio
Following FSC's Market Stabilization Measures, Securities Firms Extend Forced Sale Grace Period to 1 Day

[Asia Economy Reporter Ji Yeon-jin] Mirae Asset Securities has decided to lower the maintenance margin ratio for margin trading to 130%. Since the government introduced an exemption plan for maintaining the collateral ratio of margin loans last month to reduce forced liquidation, which was cited as a cause of the domestic stock market plunge, securities firms have been implementing easing measures one after another.

According to the financial investment industry on the 8th, Mirae Asset Securities announced on the 7th that it will lower the maintenance margin ratio for credit and loan collateral from the existing 140% to 130% starting from the 11th of this month. A Mirae Asset Securities official explained, "This is part of the financial authorities' easing measures for forced liquidation to stabilize the stock market," adding, "Mirae Asset Securities had been implementing a one-day grace period for forced liquidation, but decided to lower the collateral ratio so that customers can receive more practical benefits."

Earlier, the Financial Services Commission decided to exempt securities firms from the obligation to maintain the collateral ratio for margin loans for three months from the 4th of this month to September 30th this year, to alleviate concerns about a surge in forced liquidations due to the stock market plunge.

Forced liquidation occurs when an investor who borrowed money from a securities firm to buy stocks fails to maintain the collateral ratio as the stock price falls, causing the securities firm to forcibly sell the stocks. According to financial investment industry regulations, securities firms must secure collateral of at least 140% when implementing margin loans to investors and maintain the collateral ratio set by the firm's internal rules. Most securities firms set the collateral ratio at 140%.

However, recently, due to the US monetary tightening and the impact of the Ukraine war, concerns about a global economic recession have increased, causing the stock market to plunge. This has led to an increase in forced liquidation volumes by securities firms, which has been pointed out as a factor that exacerbates the decline in the domestic stock market.

After the Financial Services Commission introduced measures to stabilize the stock market, securities firms have successively announced easing measures for forced liquidation. On the 4th, Kyobo Securities was the first to announce a one-day grace period for forced liquidation, followed by Korea Investment & Securities, Shinhan, Hanwha, Daol, and Eugene Investment & Securities. However, Mirae Asset Securities is the first to actually lower the collateral ratio after the financial authorities exempted the obligation to maintain the collateral ratio for margin trading, and it remains to be seen whether this will spread to other securities firms.

The KOSPI index fell to the 2300 level last month, causing the daily average forced liquidation amount to soar to 20.8 billion KRW, the highest level this year. Since the beginning of this month, the daily average forced liquidation amount has slightly decreased to 17.6 billion KRW.

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