Samsung Securities has finally received approval to issue commercial paper. This marks the first time since being designated as a comprehensive financial investment business operator with over 4 trillion won in capital in 2017. With Samsung Securities joining the market, the competition in the commercial paper sector has expanded to eight firms, following Kiwoom Securities, Hana Securities, and Shinhan Investment Corp. last year. The commercial paper market has grown significantly, nearing 56 trillion won in the first half of this year, leading to intensified competition among brokerages for funding.
On September 9, the Financial Services Commission held its 15th regular meeting and approved Samsung Securities' application for short-term financial business (commercial paper) under Article 360 of the Capital Markets Act. As a result, Samsung Securities can now utilize funds raised through commercial paper for corporate finance and venture capital investments.
Commercial paper is a short-term financial product that can be issued by large investment banks (IBs) with over 4 trillion won in capital, subject to approval from financial authorities. For brokerages, it serves as a key funding tool to raise capital from clients for corporate finance and venture capital investments.
According to the financial investment industry, the outstanding balance of commercial paper issued by domestic brokerages was recorded at 55.9291 trillion won as of the end of the second quarter of this year. This represents an increase of 11.538 trillion won, or 26.0%, compared to 44.3912 trillion won at the end of the second quarter last year. Korea Investment & Securities had the largest outstanding balance at 22.468 trillion won, followed by KB Securities at 11.031 trillion won, Mirae Asset Securities at 10.5776 trillion won, and NH Investment & Securities at 8.7752 trillion won. These four firms accounted for nearly 52 trillion won of the total market.
Kiwoom Securities, which received approval for commercial paper issuance last year as the fifth firm in the industry, expanded its outstanding balance to 1.816 trillion won by the end of the second quarter this year. Hana Securities reported an outstanding balance of 999.3 billion won, while Shinhan Investment Corp. recorded 289.9 billion won. Both Hana Securities and Shinhan Investment Corp. received approval for commercial paper issuance from the Financial Services Commission at the end of last year.
As more brokerages, including Meritz Securities, seek to enter the commercial paper market, competition is expected to intensify further. Analysts suggest that the entry of new players could lead to increased competition in interest rates and products among brokerages. Although Daishin Securities has not disclosed its plans to enter the commercial paper market, it also has over 4 trillion won in capital.
However, there are concerns that the expansion of the market may increase the burden of fund management for brokerages. Since funds raised through commercial paper must achieve a certain level of profitability, managing the balance between funding rates and investment returns will become increasingly important as competition intensifies. Additionally, there may be growing pressure to continuously secure appropriate investment opportunities, such as venture capital.
A financial investment industry official stated, “The profitability of commercial paper can vary significantly with changes in market interest rates and funding rates, so simply increasing the scale of funding will not guarantee stable profits. Ultimately, the key will be how efficiently funds are raised at lower costs and how effectively they are managed.”
* This article has been translated by AI.
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