KB Securities was caught engaging in closing-price interference during proprietary trading for about half a year and received a "warning" from the Korea Exchange (KRX).
According to the financial investment industry on the 24th, the Market Oversight Commission of the exchange issued the measure at its 13th meeting on the 20th, saying KB Securities distorted prices by intervening in the formation of closing quotes in the stock market.
The transaction in question occurred in proprietary trading conducted from the second half of last year through the end of March this year by a department within the sales and trading (S&T) division of KB Securities. Proprietary trading refers to transactions in which a securities firm buys and sells stocks with its own funds, not client orders.
The transactions were concentrated mainly during the single-price session for closing orders just before the market close. The exchange concluded during its review that KB Securities' transactions were excessive compared with the market supply-and-demand conditions of the related stocks and, as a result, undermined fair trading order with orders that could unduly affect prices or mislead investors.
The commission can impose sanctions on member firms that violate the rules, including ▲ caution ▲ warning ▲ fines ▲ suspension of membership. An exchange official said, "The level of sanction is determined by comprehensively considering the scale of the violation, and this case was also handled based on the size of the transactions in question."
This is the fifth exchange sanction this year against a securities firm for closing-price interference. Earlier, the commission sanctioned four firms—Shinhan Investment, Mirae Asset, Hana Securities, and Merrill Lynch—for concentrated intervention at the close in January and October this year. Mirae Asset Securities, which was relatively larger in scale, was fined, while the other securities firms received warnings.
Lee In-hyeong, senior researcher at the Korea Capital Market Institute, said, "The closing price is a very important indicator because it serves as the basis for all stock price calculations, so (sanctions for closing-price interference) are not a routine issue," and added, "However, rather than being intentional, most cases of securities firms' involvement in closing prices tend to arise from operational carelessness."
At this meeting, the exchange issued a member warning to KB Securities and notified the firm to take voluntary action against two related employees.
KB Securities plans to convene a disciplinary committee this week to determine the level of discipline for the employees involved. A KB Securities official said the company plans to discipline and hold the employees accountable according to the disciplinary procedures of the in-house compliance and audit departments.