CFD Trading Resumes from Tomorrow... Disclosure of Overall and Individual Stock Balances

Reflecting Information by CFD Investor Type
Only High-Risk Products with an Average Month-End Balance of 300 Million KRW or More Can Be Traded

Financial Services Commission

Contract for Difference (CFD) trading, which was fully suspended following a mass limit-down incident, will resume starting tomorrow. Measures to enhance information provision, eliminate regulatory arbitrage with margin loans, and strengthen protection for individual investors will also be implemented.

The Financial Services Commission announced on the 31st that it has completed revisions to the Financial Investment Business Regulations, the Exchange's Enforcement Rules, and the Korea Financial Investment Association's Risk Management Best Practices, and will resume CFD trading.

The most significant change is that actual investors will now be reflected in the trading performance data. Previously, when foreign investment banks (IBs) executed stock trades on behalf of others, the trading entity was recorded as 'foreign' even if the actual trader was an individual. To prevent market misperceptions about the trading entities, trading performance information will now be categorized and reflected by investor type: individual, institutional, and foreign.

Similar to margin loan balances, disclosure of CFD balances will also be implemented. The total CFD balance will be announced daily after market close on the previous day through the Korea Financial Investment Association's comprehensive statistics portal.

CFD balances by stock will be sequentially reflected on HTS (Home Trading System) and MTS (Mobile Trading System) as securities firms complete their system preparations. It is expected that all securities firms' HTS and MTS platforms will reflect this information by September. Until all securities firms complete their system development, daily stock-specific CFD balance information based on the previous day will be posted on the Korea Financial Investment Association's website.

Additionally, to protect investors, the trading qualification requirements for individual professional investors will be strengthened. According to the newly established OTC derivatives investment requirements for individual professional investors, only those whose average month-end balance of equity securities, derivatives, and complex derivative-linked securities has been 300 million KRW or more for at least one year within the past five years can trade.

When an individual becomes a professional investor for the first time or confirms OTC derivatives investment eligibility for the first time, securities firms must verify the investor's identity face-to-face (including via video call). Securities firms are required to periodically verify every two years whether individuals meet the criteria for professional investor designation or OTC derivatives investment eligibility. All acts of soliciting individuals to apply for professional investor designation by securities firms are also prohibited.

Finally, the CFD minimum margin rate regulation (40%), which had been operated as an administrative guidance, will be formalized. The scale of CFD handling will be included in securities firms' credit extension limits. Accordingly, until the end of November, only 50% of CFD (excluding margin) DML will be reflected, and from December 1, 100% will be applied.

The industry will also strengthen risk management related to CFD operations by preparing and implementing risk management best practices for CFDs.

A Financial Services Commission official stated, "While thoroughly managing and supervising securities firms' sound CFD business practices, we will closely monitor each company's risk management status and market trends."

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