Exchange "CFD 'Use of Non-Public Information' and Other Unfair Trading Confirmed... Notified Financial Authorities"

The Korea Exchange announced on the 25th that it has reported suspicious stocks and related account groups suspected of unfair trading related to the stock price crash incident caused by Societe Generale (SG) in April to the financial authorities. However, the exchange did not disclose specific cases of unfair trading or the number of accounts involved.

The Market Surveillance Headquarters of the Korea Exchange established a "Contract for Difference (CFD) Special Inspection Team" consisting of 20 members from May 23 to June 21, conducting a focused inspection on unfair trading activities targeting 22,522 CFD accounts (5,843 contract holders) across 13 domestic securities firms. The analysis period covered a total of 3 years and 4 months, from January 2, 2020, to April 28, when the stock price crash occurred.

Among the suspicious unfair trading activities identified in this inspection, many involved the misuse of undisclosed information exploiting the anonymity of CFD accounts, which makes it difficult to identify actual investors. Additionally, due to the leverage characteristics of CFDs, the scale of unfair profits relative to the invested principal was found to be significant.

In cases where there was a likelihood of market manipulation, the manipulation was carried out through role division between CFD accounts and general discretionary accounts. The pattern involved large-scale purchases through CFD accounts, followed by driving up prices with general discretionary accounts, and then selling the holdings in the CFD accounts. During this process, CFD accounts were used to evade shareholding reporting obligations.

Furthermore, since CFD account orders are mainly submitted to the market through foreign prime brokers, they were interpreted as purchases by foreign or institutional investors, which in turn triggered follow-up trading by general investors.

The exchange stated, "We will improve the market surveillance system by enhancing abnormal transaction extraction criteria and advancing trading analysis techniques," and added, "We will conduct continuous and intensive market surveillance not only on CFD accounts but also on new types of unfair trading."

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