The Financial Services Commission (FSC) is set to implement reforms aimed at reducing the inconveniences investors face during stock trading. The commission is preparing to introduce a T+1 settlement system, which shortens the stock settlement period to one day, while also exploring the option of paying interest on IPO subscription deposits and reviewing the high interest rates on sale proceeds collateral loans, which currently hover around 9%. This initiative is part of a broader plan to enhance the convenience for individual investors alongside structural reforms in the capital market.
On July 15, the FSC announced during a briefing at the Blue House that it will pursue a series of measures to improve the unreasonable structures in the capital market.
First, the FSC plans to establish a roadmap for the T+1 settlement system by October. Currently, the domestic stock market operates on a T+2 basis, where actual settlements occur two days after a trade. The United States is transitioning to T+1 starting in 2024, and major markets such as the European Union, the United Kingdom, and Australia are also moving towards this system.
The FSC anticipates that, following a comprehensive overhaul of the foreign exchange market, securities settlement systems, and related regulations, the T+1 system could be implemented as early as the second half of 2027. However, due to the need for changes in trading methods for foreign investors and system upgrades, the FSC emphasizes the importance of thorough preparation before implementation.
By shortening the settlement period by one day, investors can expect to receive sale proceeds more quickly, enhancing their capital utilization and reducing settlement risks for brokerage firms.
In conjunction with the settlement period reform, the FSC will also assess the appropriateness of interest rates on sale proceeds collateral loans. Currently, investors who need funds until the settlement date after selling stocks can borrow against their sale proceeds from brokerage firms, but the interest rates are around 9%.
The FSC stated, "There have been concerns regarding the high interest rates, especially since sale proceeds are a stable collateral with virtually guaranteed principal recovery. We plan to explore improvements to alleviate the financial burden on investors while preparing for the T+1 implementation."
Additionally, the FSC is working on a plan to pay interest on IPO subscription deposits. Currently, investors deposit their subscription funds with brokerage firms during the IPO process, but they do not earn any interest while their funds are held until allocation results are announced.
The FSC is considering a framework that would return a portion of the profits generated from managing these deposits, taking into account the costs associated with the IPO subscription process. A legislative proposal to include IPO subscription deposits under the applicable customer deposit usage fee rate has already been submitted. However, the FSC will further review whether to pursue this through legislative changes or alternative methods.
* This article has been translated by AI.
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