An over-the-counter (OTC) market for professional investors, such as venture capitals and angel investors, will be opened in South Korea in order to supply venture capital to start-ups and venture businesses.
The Financial Services Commission (FSC) announced on November 14 that the new platform for professional investors, like venture capitals and financial institutions, will be annexed to the Korea Over-the-Counter (K-OTC) market operated by the Korea Financial Investment Association (KOFIA) by the end of the first quarter next year.
In 2014, the KOFIA established the K-OTC market, an upgraded version of the FreeBoard market, to help investors trade unlisted stocks of small and medium-sized enterprises (SMEs) in a more transparent and convenient manner. The K-OTC market current has just 138 stocks for trading and its daily transaction value averaged at 650 million won (US$581,395) as of the end of last year, showing a growth.
However, professional investors that hold numerous shares in unlisted companies, including venture capitals, are reluctant to participate in the K-OTC market due to concerns over trading strategy exposure, according to the KOFIA.
Accordingly, the KOFIA will set up the new exchange platform for professionals to minimize the exposure of trading information and abolish the trading requirements here so that stocks of any unlisted SMEs and startups as well as stocks of private equity funds (PEFs) and equity securities of the Small and Medium Enterprise Establishment Investment Association can be traded.
In addition, the KOFIA will allow professional investors to choose various ways of trading, such as multilateral negotiated transaction, under-the-table trading and auction, on the new exchange. It will also exempt the members of the new exchange platform from regular disclosures in its bid to attract participation from institutional investors, including venture capital funds taken part in by policy financing.