Three Global IBs Appointed as Market Makers
Korea Exchange (KRX) has expanded the number of stocks covered by its market-making system from the current 82 to 500 to make the Seoul bourse more liquid.
Under the market-making system, securities firms appointed by Korea Exchange as a market maker continuously post bid and ask prices of the assigned stocks to raise their liquidity. The system is also designed to ease the price volatility of the selected stocks and prevent the possibility of unfair trading practices, including price manipulation, by maintaining reasonable ask prices.
KRX announced on Jan. 9 that it would expand the market maker system in earnest this year. It has added three foreign securities companies – SG Securities Korea Co., CLSA Securities Korea Ltd. and Seoul branch of Goldman Sachs Group – as a market maker in addition to the seven domestic securities companies.
SG Securities Korea will start playing the role of a market maker in February, CLSA Securities Korea in March and Goldman Sachs in June. Goldman Sachs will have the highest number of assigned stocks at 187, followed by Hanwha Investment & Securities Co. at 152, SG Securities Korea at 142, Korea Investment & Securities Co. at 101 and Shinhan Investment Corp. at 99.
The number of stocks that benefit from the market maker system stood at 82, including stocks with lower liquidity, until last year, but it has increased to 500, including mid-cap and large-cap stocks with relatively lower liquidity and newly listed stocks. These companies account for 49.2 percent of the total market cap on the benchmark KOSPI market, a sharp increase from the 8.2 percent until last year. KRX has appointed a multiple number of market makers for 163 KOSPI 200 stocks with a low turnover rate, so that the market makers can competitively submit asking prices. For 33 ordinary stocks, it has appointed only one market maker.