Major amendments in KRX Market Rules and Regulations in 2012

Major amendments in KRX Market Rules and Regulations in 2012

02/01/2012

These are major amendments introduced to Market Rules and Regulations of the Korea Exchange in 2012.

1. Amendment of order entrustment and quotation submission methods by the member* (KOSPI, KOSDAQ and Derivatives Market)
To provide equal accessibility to all investors, the members are required to make public the order entrustment method in advance and not to provide differential services to its customers without justifiable reason.

In case of orders entrusted over electronic communication method, the member must ensure that the order passed through its own security device and the suitability of order must be verified before submission of quote for order.
* To become effective on April 2, 2012.

2. Restriction on submission of liquidity providing quotation for ELW* (KOSPI Market)
To reinforce the fairness of price and primary function of LP, the LPs are allowed to submit the liquidity providing quotation only in the case where the market spread ratio exceed 15%.
* To become effective on March 12, 2012.

3. Investor protection related to listed foreign company* (KOSPI and KOSDAQ Market)
It has been pointed out that the accounting transparency and internal control of few listed foreign companies are not adequate for investor protection.

To address this issue, the Market regulations concerning the internal accounting standards, role and responsibility of listing sponsor and delisting criteria for listed foreign company have been amended, thus reinforcing the measures for investor protection.
* To become effective on March 1, 2012

4. Raising Multiplier for KOSPI 200 Options* (Derivative Market)
To address the issue related to unusually high participation of retail investors in the Derivatives Market and to make the market rule compatible with the international practice, the multiplier for KOSPI 200 Options is raised from KRW 10,000 to KRW 500,000, thus the multiplier for KOSPI 200 Options is the same as the multiplier for KOSPI 200 Futures.
* To become effective in March 2011

5. Introduction of relief system for transaction errors* (Derivative Market)
To ensure the settlement reliability and make the risk management system more compatible with the international practices, when the concerned members request the KRX a relief for transaction error that meets certain requirements (the price deviates over 1/3 from the most recent price and the loss/damage amount over KRW 1 billion) after having reached an agreement between them, the KRX allows the relief for transaction error as the members requested.

Transaction errors that satisfy certain requirements and are concurred by both parties could be pursued to KRX for relief. The transaction errors in question should have been executed in prices plus/minus one-third of the immediate last price and the loss over KRW 1 billion.
* To become effective in June 2012