Korea Exchange Signs Stock Market Making Contracts with 6 Securities Firms... Number of Participants Halved

[Image source=Yonhap News]

[Asia Economy Reporter Lee Myunghwan] The Korea Exchange announced on the 30th that it has signed market-making contracts for 2022 with six member firms to enhance the price discovery function and liquidity of the stock market.

The six firms selected as market makers this year are NH Investment & Securities, Ebest Investment & Securities, Shin Young Securities, Korea IMC Securities, Kyobo Securities, and Mirae Asset Securities. From the 1st of next month until December 30th, they will continuously submit market-making quotes for the contracted stocks. Through this, they plan to supply liquidity to low-liquidity stocks.

The market maker system is a mechanism where market makers continuously provide liquidity by submitting mandatory bid and ask quotes of a certain amount in both directions during regular trading hours. Stocks that require improvement based on liquidity evaluation results and newly listed stocks are designated as market-making stocks.

However, the number of market makers and contracted stocks this year decreased compared to last year. The number of market makers in the KOSPI market dropped by 57%, from 14 last year to 6 this year. The number of contracted stocks also decreased by 25%, from 332 last year to 248.

Regarding this, the Korea Exchange explained that participation was lower than last year due to the reduction of the market-making activity base and worsening business conditions. Since last year, the market maker system has been operated focusing on low-liquidity stocks, excluding tax exemptions for stocks with a market capitalization of 1 trillion won or more or turnover in the top 50% under the Restriction of Special Taxation Act, which has deteriorated profitability. In addition, legal risks related to recent market-making activities have also increased.

A Korea Exchange official stated, "The Exchange plans to establish a foundation for active participation and activities of market makers in consultation with related organizations to revitalize market-making operations."

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