South Korean financial regulators said Wednesday that they would crack down on unfair trading practices this year, with a focus on false disclosures, unlawful short-selling and high-frequency trading activities.
The Financial Supervisory Service has set its sights on curbing unlawful short-selling by closely monitoring sudden increases in stock value and their possible links to insider trading.
The agency said in a statement that it would also step up its monitoring of foreign investment companies, zeroing in on high-frequency trading activities facilitated by foreign securities firms.
Fake M&As and false disclosures of events that impact stock prices are also going to be subjected to closer scrutiny, it said.
“In case any links are found, we plan to carry out a special investigation into the matter,” the FSS said.
High-frequency trading refers to the use of computer programs to quickly execute a large number of orders automatically. It involves the use of complex algorithms to analyze markets and place orders based on market conditions.
Though HFT is not illegal, the practice has had a major impact on the stock prices of major companies listed here. Given this, since last year the FSS has been examining the matter to check for irregularities.
The agency expects to soon take formal action against HFT-linked rule breaches based on the evidence it has collected, an official from the agency’s Capital Market Investigation Planning Department said.
The use of undisclosed information by majority stakeholders of listed companies is also on the FSS’ radar.
The body will look into whether these parties reaped unlawful gains or avoided losses due to prior knowledge of a significant event.
Last year, the FSS examined 151 cases of unfair trade practices. Of these, 36 were related to insider trading.
There were 27 cases of unlawful trading through the use of false disclosures, 23 involving breach of disclosure duty and 18 related to stock price manipulation.
Of the 151 cases, the FSS handed over 89 to the prosecution and took administrative action in another 23.
In terms of changes in the frequency of illegal activities observed, the watchdog said it saw the number of unlawful trading through the use of fake disclosures and other means grow nearly threefold from 10 cases in 2017 to 27 last year.
Meanwhile, the number of stock price manipulation cases dropped from 23 in 2017 to 18. Insider trading by majority stakeholders and internal figures became more frequent last year, the FSS said.
By Sohn Ji-young (email@example.com