Opening of Alternative Trading System This Year and Resumption of Short Selling... Institutionalization of Unlisted Stock Platforms and Token Securities

2025 Economic Sector Major Issues Solution Meeting

Financial Services Commission "Diversification of Investment Product Trading Methods"

ATS Launch in March... Multiple Exchanges for the First Time in 70 Years

Institutionalization of Token Securities and Fractional Investment

Kim Byung-hwan, Chairman of the Financial Services Commission. Photo provided by the Financial Services Commission

This year, the market for trading various capital market investment products such as listed and unlisted stocks, derivatives, and Token Securities (ST) in Korea is expected to become more diverse than before. The government plans to support the launch of the country's first Alternative Trading System (ATS) within the year and institutionalize unlisted stock trading platforms, fractional investment, and ST, which were previously only pilot projects (sandbox).

On the 8th, the Financial Services Commission announced that Chairman Kim Byung-hwan reported this and other 2025 work plans to Acting President Choi Sang-mok at the 2025 Economic Sector Major Issues Solution Meeting held at the Seoul Government Complex in Gwanghwamun, Seoul.

Transition to Multiple Exchanges... ATS to Trade Over 800 KOSPI and KOSDAQ Stocks

On this day, the Financial Services Commission emphasized the diversification of domestic investment product distribution platforms within the year. In March, the Alternative Trading System (ATS), a multilateral trading facility for listed stocks, will be launched. Once ATS is operational, investors can choose between the Korea Exchange (KRX) and ATS to execute their stock orders. This will break the monopoly of the Korea Exchange on securities trading that has lasted for over 70 years since 1956.

The financial authorities plan to allow over 800 highly liquid KOSPI and KOSDAQ stocks to be traded through ATS. The trading hours of ATS will be from 8 AM to 8 PM, which is 5 hours and 30 minutes longer than the existing KRX. The authorities believe that the introduction of a multiple exchange system could lead to lower transaction fees due to competition between exchanges.

In June, the domestic night market for derivatives will be launched. The existing night derivatives market is not a domestic market but is structured to trade in conjunction with the European derivatives exchange EUREX. The government plans to introduce a domestic system with the same structure as the existing system in cooperation with the Korea Exchange.

This night market will support the trading of 10 products for a total of 12 hours from 6 PM to 6 AM the next day. The existing market supports the trading of 5 products for 11 hours. The Financial Services Commission has been promoting the opening of the night market by advancing the opening of the derivatives market by 15 minutes (8:45 AM) since July 31, 2023.

"Token Securities and Unlisted Stock Trading Platforms to be Formalized"

Various capital market investment product-related markets and systems, which are still operated as sandboxes, will also be formally institutionalized. Token Securities (ST) and unlisted stock and fractional investment trading platforms will each be formally institutionalized. ST is a security issued in token form using blockchain technology. Various rights such as intellectual property (IP) and artworks can be tokenized and traded. A fractional investment platform that allows multiple people to invest in specific assets by formally issuing non-monetary trust beneficiary securities will also be institutionalized.

The Financial Services Commission has been promoting the institutionalization of ST and fractional investment platforms since 2023. Although related law amendments have been submitted to the National Assembly, they have not been prioritized for discussion. The Financial Services Commission extended the period for revising related laws for unlisted stock trading platforms by 6 months in September last year.

Kwon Dae-young, Secretary-General of the Financial Services Commission, said, "The sandbox for token securities and fractional investment platforms will expire in June, and the sandbox for unlisted stock platforms will expire in September," adding, "We will proceed with the institutionalization process considering this."

The Business Development Company (BDC) will also be introduced. BDC refers to a listed public fund that invests in unlisted venture and innovative companies. The authorities expect that funding for small and venture companies will become more convenient through ST, BDC, and fractional investment.

Full Resumption of Short Selling Transactions at the End of March... Virtual Asset ETFs 'Not Yet'

On this day, the Financial Services Commission reaffirmed its plan to fully resume short selling transactions, which have been completely banned in the domestic market since November 2023, at the end of March. By March, the computerized system for short selling, including the balance management system of global investment banks (IB) and the short selling central inspection system (NSDS) of the Korea Exchange, will be completed. Institutional improvements such as resolving differences in repayment periods and collateral ratios for short selling lending and borrowing between institutional investors and individuals will also be completed.

However, the atmosphere for trading virtual asset exchange-traded funds (ETFs) in the domestic stock market is still distant. The content related to new investment products based on virtual assets was not included in the Financial Services Commission's work report on this day. Secretary-General Kwon said, "Regarding the virtual asset market, we will first prepare system stability and investor protection measures."

"ISA to be Usable as a Medical Savings Account"

The Financial Services Commission also announced its intention to continue the corporate value-up (value enhancement) program policy. The expansion of the Individual Savings Account (ISA), which was promoted last year but failed, will also be re-promoted. ISA is an integrated account that can hold various financial products such as deposits, savings, and equity-linked securities (ELS) in one account. By investing through this, tax-free benefits are applied to interest and dividend income up to a certain amount annually.

The government previously announced that it would double the ISA deposit limit from the current annual 20 million won and a total of 100 million won (5-year maturity) to 40 million won annually and a total of 200 million won. The tax-free limit on interest income will be increased from the current 2 million won for the general type and 4 million won for the low-income type to 5 million won for the general type and 10 million won for the low-income type.

The use of ISA will also be expanded. The plan to ease the mid-term withdrawal regulations for ISA for medical expenses is being reviewed. Previously, mid-term withdrawals could be made up to the principal amount paid, and withdrawals beyond that required the account to be closed. In the future, for ISA, the deposit limit will be restored when withdrawing for medical expenses. If medical expenses are paid with a card linked to ISA, IRP, etc., the purpose of medical expenses will be automatically recognized. If the regulations change, investors will be able to use the ISA account as a comprehensive investment account and a medical savings account.

In May, the Financial Services Commission will select about 10 excellent companies for corporate value-up and award them. Award-winning companies will be promoted through the exchange's website and securities company MTS, and will be given priority participation opportunities when holding joint IRs with the exchange. The plan to re-promote tax support measures such as corporate tax reduction for value-up excellent companies will also be pursued.

Last Year's Focus on 'Value-Up' Reports, This Year on 'Market Stability'

The main content of this year's Financial Services Commission work report focused on revitalizing the real economy through finance and supporting the recovery of people's livelihoods. This contrasts with last year's focus on revitalizing the domestic stock market and gathering stock market support measures such as the value-up program at the Korea Exchange in Yeouido, Seoul.

This is interpreted as the recent emphasis by various government departments on managing economic risks and enhancing vitality amid concerns about domestic industry and economic slowdown. The Financial Services Commission said, "This year, we will prioritize market stability while strengthening people's livelihood finance and accelerating financial innovation."

Seon Han-gyeol, Reporter always@hankyung.com