Yi Whan-woo is a Korea Times journalist primarily covering finance. He writes in-depth articles on macroeconomy and financial markets and previously covered sports, politics, diplomacy and inter-Korean affairs, among others. Feel free to contact him at yistory@koreatimes.co.kr.
Financial regulators to adopt AI to root out unfair stock trading
An official of the Financial Services Commission gives a briefing on measures to root out unfair trading practices at the Korea Exchange in Seoul's financial district of Yeouido, Wednesday. Yonhap
By Yi Whan-woo
New tools expected to help implement president's 'one strike, you're out' rule
Artificial intelligence (AI) will be used as a new regulatory tool to crack down on unfair stock trading practices in line with President Lee Jae Myung’s stock market reform drive, financial authorities said Wednesday.
The Financial Services Commission (FSC), jointly with the Financial Supervisory Service (FSS) and the Korea Exchange (KRX), said Lee’s zero-tolerance policy will be strictly implemented against stock price manipulation, illegal short selling practices, false disclosures and other practices designed to seek illegal financial gains.
The three organizations will establish a special joint task force of 34 officials on July 30 to monitor suspicious activities and launch investigations promptly when necessary.
“The FSC, the FSS and the KRX have come up with these measures after discussing ways to strengthen initial responses and enforce strict penalties against unfair trading practices,” the FSC said.
It explained that the discussion took place after the president addressed the need for a “one strike, you're out” rule, a week after his June 4 inauguration.
Lee said lax punishment for unfair trading practices was behind the nation's longstanding market undervaluations.
He then signaled that anyone caught manipulating stock prices or engaging in other illegal practices will face permanent expulsion from trading.
The financial authorities assessed that AI will help serve Lee’s goal, as such highly advanced technology is capable of monitoring for suspicious activities that humans may fail to notice.
In particular, AI will be adopted to monitor individual traders and ensure they do not use other people's accounts for deceptive trading.
Currently, the human-based system is designed to monitor individual accounts, and often fails to identify multiple accounts held by a single suspect.
The financial authorities said they will propose to revise the Capital Markets Act concerning pseudonymized personal information, in order to make AI-based monitoring possible.
As for the "one strike, you're out" rule, the financial authorities explained the newly introduced administrative sanctions, including payment suspension, fines, restrictions on sales and purchases of financial products and bans on the appointment or reappointment of executives.
Specifically, fines of up to twice the amount of unjust gains will be imposed on suspected offenders to recover illicit profits and eliminate incentives for unfair trading.
In cases involving major shareholders or executives implicated in larger-scale unfair trading practices, the authorities will actively disclose such information publicly to raise investor awareness and help prevent similar incidents.
“We plan to actively utilize these new measures to effectively recover illegal gains and permanently remove offenders from the capital market,” the FSC said.