Tuesday May 29 2018
News Source: Global Exchanges
Focus: Trading Systems and Technology
Type: General
The Financial Services Commission (FSC) has announced measures to improve the safety of stock trading system. The measures were announced following an fault within the system which exposed systemic flaws in internal and external controls. Due to this it took 37 minutes for the securities firm to halt trading of the mistakenly issued stocks even after it recognised the error. It took almost an hour for the company to withdraw such stocks from trading accounts.
Against this backdrop, the measures are intended to introduce multi-layered verification systems covering the entire process of stock trading in order to minimise the likelihood of an incident from any error or mistake.
The measures will ensure the following:
- Securities firms will tighten internal controls over stocks coming in and out of trading accounts and cross-check with the Korean Securities Depository. The value and volume of stocks per deposit or withdrawal will be capped – e.g. 5% of total outstanding shares, KRW 6 billion – to prevent any possible error if the process involves manual tasks.
- Before market opens for trade, securities firms will be required to verify on a daily basis whether its total balance of stocks equals the sum of stock holdings by Currently, securities firms check on their total balance of stocks only, making it difficult to identify errors in each investor’s stock holdings in a timely manner.
- Securities firms will be required to introduce an “emergency button” system that would immediately halt erroneous trades by their employees, once an incident
- To prevent market shocks from massive trading orders, the KRX will lower the threshold for activating rejection of orders, currently triggered with an order exceeding 5% of listed stocks.
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