99 Cases of Unfair Trade Last Year... Insider Information Usage Most Frequent

The Market Surveillance Committee of the Korea Exchange announced on the 13th that it reported 99 cases of suspected unfair trading to the Financial Services Commission based on last year's abnormal trading investigations.

Korea Exchange, Yeouido, Seoul. Photo by Jinhyung Kang aymsdream@

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The most common type of suspicion was insider trading, accounting for 43 cases or 43.5%. This was followed by fraudulent trading with 31 cases (31.3%) and market manipulation with 23 cases (23.2%). Fraudulent trading cases increased by 40.9% from 22 cases the previous year to 31 cases, due to a rise in complex unfair trading cases related to no-capital mergers and acquisitions (M&A) and various themes. Market manipulation cases rose by 27.8% from 18 cases the previous year to 23 cases, driven by new types of unfair trading such as ultra-long-term market manipulation. These cases evaded regulatory market surveillance by dispersing order media over a long period targeting low-liquidity stocks.

By market, KOSDAQ had the highest number with 67 cases, followed by KOSPI with 31 cases, and derivatives with 1 case. The KOSDAQ market showed a concentration of notifications due to the large number of listed stocks and small to medium-sized marginal companies.

The number of major suspects in unfair trading increased by 42.9% from 14 the previous year, averaging 20 suspects per case. The number of suspects in fraudulent trading cases averaged 39 per case, up 11.4% from 35 the previous year, due to an increase in complex unfair trading cases involving large-scale linked groups. The number of suspects in market manipulation cases averaged 25 per case, a 66.7% increase from 15 the previous year, due to the occurrence of large-scale ultra-long-term market manipulation cases.

The average number of major unfair trading notification accounts was 31 per case, a 55.0% increase from 20 the previous year. The estimated average amount of illicit gains per case was approximately 7.9 billion KRW, up 71.7% from 4.6 billion KRW the previous year.

Additionally, the key characteristics of unfair trading presented by the Exchange's Market Surveillance Committee last year included ▲ the emergence of intelligent new types of ultra-long-term market manipulation ▲ a sharp increase in fraudulent trading involving company insiders and investment associations ▲ the use of anonymity and leverage in Contracts for Difference (CFD) accounts for insider trading.

An official from the Exchange stated, "As the base of stock investment expands, complex unfair trading is increasing in sophistication and complexity," adding, "Investors need to be cautious of stocks with long-term price increases unrelated to corporate value, theme stocks spreading baseless information, online-related and marginal company unfair trading." The official also said, "This year, under a firm cooperative system with regulatory agencies, we plan to focus investigations on social issues and major cases."

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