The government has made this decision to enhance investor convenience and reduce transaction costs, and at the same time to promote the decentralization of the Korean economy for balanced growth across the country. The new integrated exchange, hereinafter referred to as the "Korea Exchange" for easy reference, will be established as a demutualized stock company and will be headquartered in Busan, the second largest city in Korea.
The Korea Exchange will have four business divisions: the Management Support Division; Stock Market Division; KOSDAQ Division; and Derivatives Market Division. All the equity derivatives currently listed on the KSE will be transferred to the Derivative Market Division. Additionally, the Korea Exchange will establish the Market Surveillance Committee to perform all functions relating to market surveillance, including member firm inspection and other tasks relating to self-regulation.
The Management Support Division will be stationed in the headquarters building in Busan, but other three market operation divisions will remain at the same locations where the respective exchanges are, i.e., the Stock Market Division (KSE) and KOSDAQ in Seoul and the Derivative Market Division (KOFEX) in Busan.
The functions of the Management Support Division include the planning of business strategies, personnel management, research, etc. The three market operation divisions will be responsible for operating their own markets and have some autonomy in the areas of the personnel and budget.
To proceed with the effective implementation of the market restructuring in consultation and cooperation with the parties concerned, the government will soon establish a "Committee for Restructuring Securities and Futures Markets".
The Committee, which will be chaired by Vice Minister of Finance and Economy, will consist of Vice Chairman of the Financial Supervisory Commission, Deputy Mayor for political affairs of Busan City, and top executives of the KSE, KOFEX, KOSDAQ Committee, KOSDAQ, Korea Securities Depository, Korea Securities Computer Corporation, Korea Securities Dealers Association, and Korea Futures Association.
As for its functions, the Committee will formulate the detailed plans and time table for market restructuring, monitor the progress of transferring of KSE-listed equity derivatives to the KOFEX, prepare the detailed plans for the establishment of the Korea Exchange, including the composition of shareholders, organizational structure, personnel requirements, and devise the methods for the valuation of property of the three exchanges. The Committee will also prepare the detailed plan for reshaping securities market infrastructure, including the clearing, settlement and electronic systems.
So far, only the framework for market restructuring has been set forth, leaving the most detailed plans yet to be worked out. All the works necessary for the merger of three local exchanges, including the enactment and revision of relevant laws and regulations, will be completed by the end of 2004.
Please click here for schematic of new structure.
