To protect the rapidly increasing number of overseas stock investors, the obligation for securities companies to separately deposit U.S. dollar investor deposits will increase from 70% to 80%. A new obligation to separately deposit 50% of Japanese yen investor deposits has also been established.
The Financial Services Commission (FSC) held a regular meeting on Nov. 11 and approved an amendment to the 'Capital Market Business Regulations' that includes these details. According to the Capital Markets Act, investor deposits made to securities companies are currently being separately deposited with securities finance companies. This aims to distinguish and protect the assets of investors from the proprietary assets of securities companies. In the case of Korean won investor deposits, 100% is being separately deposited with securities finance companies.
The separate deposit system for foreign currency investor deposits was first introduced in December 2021. However, considering that the means for securities companies to procure foreign currency is limited and that time discrepancies related to remittances may occur, it has been regulated that only 70% of investor deposits in U.S. dollars be separately deposited.
The FSC decided to strengthen the standards based on the operational history of the separate deposit for foreign currency investor deposits. In the case of U.S. dollars, it has been found that the withdrawal rate was 12.2% compared to the average daily deposit in the first half of this year, indicating that securities companies can respond to withdrawal requests by holding only about 20%. As a result, the obligation for separate deposit of investor deposits has been increased to 80%.
Additionally, among foreign currency deposits excluding the dollar, 83% are in yen, leading to the decision to newly apply the obligation for separate deposit of investor deposits. Since procuring yen is more difficult than procuring dollars, the obligation for separate deposit of investor deposits has been set at 50%.
The changed standards for separate deposits of foreign currency investor deposits will be implemented starting from the 19th. An official from the FSC noted, "With the reorganization of the system, protection for foreign currency investor deposits will be further strengthened, and the ability to support foreign currency liquidity for securities companies in times of crisis is expected to increase."
The FSC also decided to revise the remittance procedures for foreign currency investor deposits separately deposited with securities finance companies. Previously, deposits had to be transferred from the securities finance company's deposit account to the securities company's foreign exchange bank account before being remitted to other institutions. From now on, the securities finance company will be able to remit directly to other institutions.
In addition, the FSC improved the personnel requirements required for the licensing of multi-trade matching companies (ATS) from current investment solicitation advisory professionals to trading matching professionals more related to ATS operations. The personnel requirement will change from 'those who have worked in trading matching operations for more than two years at domestic and foreign exchanges, ATS, and associations (K-OTC)' to 'those who have been engaged in trading matching operations for more than four years in financial companies.'