The Korean Ministry of Finance & Economy announced
that it is studying ways to establish an Internet-based stock exchange.
The ministry might revise the existing securities transaction law before
the end of the year to pave the way for the establishment of cyber stock
exchange.
“The idea is designed to help listed companies improve their financial
structures through funding from the stock market as well as to cope with
the informationalization of businesses,” a ministry official said.
In doing so, the government will develop regulations for security of
damages that could occur in the process of cyber stock trading so that the operating company of the
Internet stock exchange could compensate for such losses.
It also will create a so-called Internet stock exchange fund, in which
participating companies will jointly accumulate a certain portion of
turnover as reserve.
“By allowing an Internet stock exchange, brokerages involved will compete
so that their stock trading service will improve and relevant costs will be
lowered,” the official said.
At present, investors in Korea can place orders for stock trading through
online networks provided by securities firms. But these online stock trades
have to go through the Korea Stock
Exchange for settlement, although KOSDAQ, the Korean version of NASDAQ,
is an exception.
Industry analysts point out that the key to success in the cyber stock
exchange will largely depend on how many orders it could receive from
investors. If the trading volume is smaller than the commercially viable
level required for a normal operation, it could cause problems as stock
trading would not be processed in proper time.
“Stock investors, in the long run, will benefit from the cyber stock
exchange. However, prior to the introduction of the cyber stock exchange, a
series of problems related to system security and safety in stock
transactions have to be solved,” said an official of the Korea Securities Dealers Association.
Korea’s online securities trading began in June 1997 when Chohung Securities launched Korea’s first online
service. Since then, the nation’s online
securities trading market has grown substantially. Now, the
market is valued at some 25 trillion won (US$20.8 billion).
With its convenience, Internet stock trading even lures those Internet
users who have never had an interest in stock investment into the
securities market. It is believed that the relatively cheap trading
commission is one of the biggest merits of online trading.
Prompted by the nation’s online trading boom, coupled with the bullish mood
of the Korean
stock market, local securities firms are now considering to introduce an
Internet stock plaza, a room equipped with PCs and other relevant
facilities where investors can easily trade stocks through the Internet.
This new location for online stock trading is quite like the Internet
Game Arcade which is gaining popularity throughout the nation. Tongyang Securities Co. is preparing to
introduce such stock trading rooms and is now collecting relevant
information from the U.S.
“We believe the Internet stock trading room will become a profitable
business in Korea as demand for online stock trading grows rapidly,” said
an official at Tongyang Securities.
Industry analysts predict that smaller securities firms would be hard hit
by the advent of new stock trading operations, which are expected to offer
online brokerage services at a cheaper price than the existing securities
firms.
