Lee Min-hyung joined The Korea Times in 2014 and has worked as a journalist mainly in Korea’s finance, tech and automotive industry. He specializes in content creation, breaking news and in-depth analysis currently on transportation and mobility. You can reach him via mhlee@koreatimes.co.kr.
Securities firms gear up for CFD trade resumption
Korea's financial district of Yeouido, Seoul / gettyimagesbank
By Lee Min-hyung
By Lee Min-hyung
Brokerage houses are moving to resume the trading of contracts for difference (CFD) after they suspended the practice in April due to scandalous stock manipulation activities.
Some stock manipulators exploited the situation regarding the risky trading of CDFs back then. Eight listed shares suffered abrupt collapses in their valuation, hit hard by their involvement in the scandal.
Yet most securities firms here are gearing up for the resumption of the controversial trading of CFDs as of the beginning of September. SK Securities is the only company that promised to stop operating the service for good, while most others are forecast to resume CFD trading sometime by the end of next month.
A group of nine out of 13 securities firms ― which operated CFDs ― decided to resume trading after improving existing services to prevent the recurrence of such financial fiascos. They include Meritz Securities, Shinhan Securities and Kyobo Securities.
Critics raised the possibility of some brokerage houses following SK Securities' lead, but no others have yet to make the same pledge. This was because CFD trading was largely targeted at the wealthy, not typical retail investors, due to its tax benefits.
Despite the negative public sentiment on CFD trading resumption, securities firms can attract more capital for their wealth management businesses by reopening such services.
Some major brokerage houses such as Korea Investment & Securities, Samsung Securities and Yuanta Securities are still amid internal talks on whether and when to resume it, but they are forecast to do so soon, in a bid to diversify their revenue streams amid lukewarm stock market sentiment.