Anna Jiwon Park has been covering the politics at The Korea Times since the summer of 2024, when she joined the press pool for the Office of the President in Korea. Prior to that, she spent about five years reporting extensively on financial markets, regulatory authorities and the financial industry. She joined The Korea Times in 2019 after spending eight years as a broadcast journalist at Arirang TV, Korea’s leading global broadcaster, covering politics, defense and culture.
CFD trading to partially resume with tighter regulations from September
Financial district of Yeouido in Seoul / gettyimagesbank
By Anna J. Park
By Anna J. Park
Local securities firms will partially resume contract for difference (CFD) trading from September, while financial regulations will be strengthened to prevent stock manipulation schemes utilizing the derivative products.
A CFD is a high-risk leveraged derivative contract that allows speculation on short-term market movements, without having to own real assets.
Out of 13 local securities firms that operated CFD trading, four of them ― Meritz Securities Korea, Kyobo Securities, Eugene Investment and Yuanta Securities ―- have decided to resume new trade services of CFD products from Sept. 1. The other eight brokerage companies, except SK Securities which completely withdrew from the CFD business, are examining when to resume the service.
Trading of the derivative price difference contracts has largely been suspended at local securities companies since June, as massive stock manipulation schemes that broke out in April, allegedly led by Ra Deok-yeon, the head of an investment firm, were utilizing the loopholes of domestic CFD trading. It is estimated that nearly 1,000 investors, mostly well-off individual professionals, incurred financial damage totaling 800 billion won ($600 million) to one trillion won.
Thirteen securities companies that operated CFD trading have since suspended both new subscriptions into the service and new transactions, as the financial authorities recommended them to do so until the regulators come up with revised regulations at the end of August.
The Financial Services Commission (FSC) announced, Thursday, a set of more stringent rules when it comes to operating CFD trading services. The revised regulations state that a minimum of 40 percent of the amount of CFD trading should be deposited as a requirement.
Furthermore, the monthly average balance requirement for individual investors who are qualified to trade CFD has gone up to 300 million won from the previous 50 million won. Qualified individual investors are also required to manage the total amount of CFD trading under 50 percent of their own capital for the time being, although the limit is slated to be expanded to 100 percent in the future. They're also obligated to submit daily CFD balance reports to the Korea Financial Investment Association (KOFIA).