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Many pointed out that the recent stock price crash took advantage of a loophole in the contract for difference trading system.

That's why the financial authorities decided to overhaul this on a large scale, and reporter Yoo Deok-ki will explain the details.


Contracts for difference, CFDs, allow investors to invest up to 40.2x even if they don't own the stock, paying only 5% of the margin to the brokerage.

Since it is done in the name of the brokerage, it is impossible to know who the trading orderer is.

The Financial Services Authority has come up with a remedy for these loopholes that were exploited in the SG Securities stock price crash.

First of all, we made sure that it was clearly indicated that it was an actual 'personal' investment going forward.

It is to prevent stock price manipulators from hiding behind the names of foreign securities companies.

In addition, the balance and weight of CFDs for each individual stock are also disclosed, so that the degree of leveraged investment and the expected counter-volume can be predicted.

The investment threshold for individuals has also been raised, and over-the-counter derivatives can only be traded if there is an average balance of 1 million won or more at the end of the month for more than one year.

[Kim So-young/Vice Chairman of the Financial Services Commission: Designate individual professional investors, which were conducted non-face-to-face, and clearly notify investors of the relevant risks by requiring face-to-face identification of investors in OTC derivatives contracts....]

Securities firms are required to manage CFDs within the credit facility limit of 3% of their equity.

With this improvement, trading in new CFDs will be effectively restricted for the time being, and trading will resume in about three months with brokerage firms with improved systems.

[Hwang Se-woon, Research Fellow, Capital Market Research Institute: If CFDs are included in the credit limit, this is bound to be the biggest impact, and the capacity of brokerage firms to offer CFD services will actually be considerably reduced.]

It is evaluated as a strong water level improvement measure, but it seems difficult to avoid pointing out that it is a belated response after major damage has occurred.

(Video Interview: Park Young-il, Video Editing: Choi Eun-jin, Screen Credit: Financial Services Commission)