More KOSDAQ Stocks to Be Included in Derivatives Market

An increasing number of KOSDAQ stocks will be traded on the derivatives market from next year in order to revitalize the KOSDAQ market. 

The Derivatives Market Division of the Korea Exchange (KRX) announced that it will help the National Pension Service (NPS) invest more into the KOSDAQ market and include more KOSDAQ stocks in the derivatives market as early as from the first quarter next year in its bid to comply with the government’s measures to activate the KOSDAQ. 

In this regard, the KRX will create the KOSPI 150 Option and introduce the sector index, including biotechnology that leads the upward flow of the KOSDAQ as well as add more stocks on KOSDAQ in the single-stock futures market. An official from the KRX said, “Since the KOSDAQ has been the market for mainly individual investors, there have been not in great demand for derivatives products that hedge risks. With the extension of investment by the NPS, however, there is a growing need to brace for increasing demand for derivatives products.” 

This year, the average daily trading volume of the KOSDAQ 150 futures came to 82.6 billion won (US$75.13 million) as of November 16 this year, accounting for a mere 0.5 percent of 15.94 trillion won (US$14.49 billion) of the KOSPI 200 futures. In short, there is a bigger gap between the KOSPI and the KOSDAQ on the derivatives market than that on the spot market. Moreover, the daily trading volume of the products based on the KOSDAQ index on the single-stock futures market amounted to 61.9 billion won (US$56.3 million), taking up 6.2 percent of 1.01 trillion won (US$914.69 million) of that based on KOSPI index. There are 112 KOSPI stocks on the single-stock futures market but there are only 18 KOSDAQ stocks such as Celltrion, CJ E&M and Medy-Tox.

Options products are in more difficult conditions. There are no blue chip index options products like the KOSPI 200 Option on the KOSDAQ market. Celltrion, which is the only company included in the 30 equity options on the KOSDAQ market, will relist on the KOSPI early next year.

In addition, the KRX is developing new benchmark index reflected by both the KOSPI and the KOSDAQ indexes to encourage institutions to participate in the KOSDAQ market. An official from the KRX said, “There is currently the KRX 100 index formed with 100 stocks but only eight KOSDAQ stocks are included. We haven’t decided on anything about the new benchmark index. Several proposals are still under consideration.”