Korea FSC to Improve Fractional Trading System

South Korea's Financial Services Commission (FSC) recently announced that it plans to make improvements to the current fractional trading system and make fractional trading of both domestic and foreign stocks available.

Under the current system, individual securities firms that wish to offer fractional trading services to their customers have to apply for regulatory exemptions. However, the new system will be based on a special infrastructure set up at Korea Securities Depository (KSD) that is dedicated to fractional trading and can be accessed and used by any securities firms.

Stock trading in fractional shares of foreign stocks will be directly recorded in the securities firms’ account books. KSD will maintain separate account books on fraction trades and regularly check their consistency with those of securities firms. Investors will be able to trade in fractional shares of foreign stocks and collect dividends via domestic securities firms.

As for domestic stocks, the fractional trading will take the form of multiple beneficiary certificates being issued from a single stock share. Securities firms gather fractional trade orders from investors to form a whole single share which then can be submitted to the Korea Exchange with an asking price. KSD then issues beneficiary certificates and investors obtain them according to the amount of their order.

It is expected that fractional trading service of foreign stocks will become available within this year while that for domestic stocks will be launched in the third quarter of next year.

Last month, FSC announced that it will launch “crypto asset monitoring bureau”​, an independent bureau that will be managed by the Korea Financial Intelligence Unit (KFIU) .