Park Jae-hyuk is a seasoned journalist who has provided comprehensive coverage of South Korea's corporate dynamics, economic policies, industry challenges and the global positioning of Korean companies. Based on the articles he has written since joining The Korea Times in 2016, his investigative approach has helped readers understand corporate governance, economic trends and business strategies shaping South Korea’s economy.
Kiwoom unprepared for 'negative' oil prices
A woman passes by an electronic board showing the West Texas Intermediate crude for May delivery closing at negative $37.63 per barrel at the Yonhap Infomax head office in Seoul, Tuesday. / Yonhap
By Park Jae-hyuk
By Park Jae-hyuk
Kiwoom Securities is facing lawsuits from customers as its home trading system (HTS) malfunctioned after crude oil prices dipped below zero, according to industry officials, Tuesday.
The West Texas Intermediate (WTI) crude for May delivery closed at negative $37.63 per barrel in New York, Monday (local time), a day before the expiration of the May delivery.
When the U.S. benchmark oil prices turned negative for the first time in history, trading systems of Korean brokerages failed to perceive these unprecedented “negative prices.”
Domestic investors alleged they could not sell their crude oil futures as a result, although they wanted to sell their futures at a loss. Those who maintained long positions said they were forced to liquidate their futures after receiving cash calls.
As Kiwoom was late to correct the errors, its customers are expected to have suffered greater losses than investors who traded via other brokerage houses.
“I tried to liquidate the crude oil futures for May delivery at 3 a.m., but it was unavailable,” an investor wrote on Kiwoom's official website. “I had no choice but to witness the falling prices.”
Investing in futures could incur larger losses than principals, as it causes leverage effects.
Yuanta Securities and Korea Investment & Securities said they incurred minor investor losses as they corrected the errors within a couple of hours.
Meritz, Daishin, Shinhan and Kyobo said they were able to avoid the accident as they rolled over into the next futures contract earlier. Samsung Securities said they do not offer crude oil futures trades.
Following the accident that seems to have incurred major investor losses, the Financial Supervisory Service began to investigate the size of losses occurring at each brokerage.
Kiwoom said it will compensate customers for their losses, after finding out exactly how much they lost.
The company was also criticized in March as its mobile trading system (MTS) malfunctioned three times that month amid the intensifying stock market volatility. Back then, customers complained about the system as they could not conduct stock trades at the right moment, due to delayed access.