The Financial Services Commission is set to introduce regulations targeting high-frequency trading (HFT), which has been contributing to market volatility.
During the 'Korea Premium Weeks 2026' event held at The Grand Lotte Seoul on September 28, Byun Je-ho, head of the Capital Markets Bureau, stated, "In June and July, the concentration in the semiconductor sector and the expansion of leverage coincided, leading to increased market volatility and subsequent sharp corrections. This case has confirmed that excessive leverage can amplify investor losses and market volatility, prompting us to prepare appropriate responses to potential risks in the stock market."
Byun emphasized the need to create a market that grows based on corporate performance and investor funds rather than leverage. He mentioned plans to strengthen management of margin trading and credit financing, as well as to revise contingency plans. He urged understanding of the need to reform regulations in line with the government's trend of enhancing funding and adapting to new market conditions. He also highlighted the intention to actively respond to indiscriminate investment recommendations and market disruption by influencers.
Additionally, efforts to attract long-term funds and establish shareholder-friendly governance will continue.
Byun noted, "We will build a long-term investment lineup that spans all life stages, from child growth funds to retirement pensions, and create a productive finance ISA separate from existing ISAs to broaden the inflow of long-term funds into the domestic stock market. This will create a mutually supportive structure for asset formation among the public and the stable investment foundation of the capital market, ultimately enhancing the stability of the capital market in the long term."
He added, "We will also create an environment where companies can more actively return profits to shareholders, such as through quarterly dividends."
For companies with chronically low price-to-book ratios, penalties such as surcharges on inheritance and gift taxes will be introduced. The 'Bear Hug' system will also be implemented to eliminate incentives for keeping stock prices low. This strategy involves the acquiring company publicly presenting attractive acquisition conditions to the target company's board, compelling them to review and disclose their position. This approach maximizes market pressure on companies that intentionally allow their stock prices to remain low, making them targets for hostile takeovers.
Byun also announced plans for a significant restructuring of the KOSDAQ market, which currently mixes promising companies with underperforming ones, fostering overall market distrust.
He stated, "We will promote the listing of promising innovative companies while decisively removing penny stocks and low market capitalization firms, and establish a 'KOSDAQ Select' segment to attract institutional funds. Rather than responding to regulatory circumvention with new regulations, we will steadfastly pursue policies based on the belief that 'sunlight is the best disinfectant.'"
* This article has been translated by AI.
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