Exchange Announces Amendment to Business Regulations for Managing High-Speed Algorithmic Traders

[Asia Economy Reporter Minji Lee] The Korea Exchange announced on the 25th that it will revise the rules of securities and derivatives markets regarding the registration of high-speed algorithmic traders and the introduction of risk management systems to strengthen risk management in the capital market, and will gather opinions from market participants.

This is due to the increased possibility of market risk spreading caused by the rise in algorithmic trading following the digitization and automation of securities trading. The Exchange plans to establish a comprehensive management system to efficiently manage algorithmic trading. The announced revision of the rules is not finalized and may be changed during the process of collecting market participants' opinions and consulting with financial authorities.

The Exchange plans to manage the trader registration system on a membership basis. Investors who wish to engage in high-speed algorithmic trading in the KRX securities and derivatives markets must pre-register with the Exchange through a member. A separate identification code will be assigned to registered high-speed algorithmic traders for monitoring purposes.

Furthermore, the responsibility of members for management will be strengthened. To prevent order errors and other incidents, the Exchange plans to specify members' risk management obligations regarding high-speed algorithmic traders. The Exchange explained, “We will specify members' risk management duties such as periodic system inspections, customer order limit management, and trade monitoring in the regulations.” Additionally, the Exchange intends to provide registered high-speed algorithmic traders with risk management tools at the level of advanced markets to create a stable trading environment.

This regulation is expected to be implemented in conjunction with the launch of the Exchange’s next-generation system in January next year, after approval from the Financial Services Commission and other procedures. After the implementation date, a three-month grace period for registration will be granted to ensure smooth establishment of the system.

The Exchange analyzed, “While minimizing the negative impacts of algorithmic trading such as market instability caused by order errors, it will be possible to enhance the positive functions of algorithmic trading, such as improving market liquidity and price efficiency.”

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