The Korea Exchange (KRX) will revise the Market Surveillance Regulation enforcement detailed rules to prevent large-cap stocks with top market capitalization, such as SK hynix, from being excessively designated as investment warning issues.
On the 26th, the exchange's Market Surveillance Committee said that, amid the recent overall uptrend in the stock market, situations have occurred in which large-cap stocks with low likelihood of unfair trading are designated as investment warning issues under the ultra-long-term rise and unsound conditions category, and that it has changed the related designation criteria to enhance the effectiveness of the system.
The revised Market Surveillance Regulation enforcement detailed rules are scheduled to take effect on the 29th, and if an already designated issue ranks within the top 100 by market capitalization, it will be immediately delisted from the investment warning issues on the effective date.
The core of the amendment is to exclude large-cap stocks ranking within the top 100 by combined market capitalization of the KOSPI and KOSDAQ from designation as investment warning issues under the ultra-long-term rise and unsound conditions category.
The ultra-long-term rise and unsound conditions category, which led to a wave of large-cap stocks such as SK hynix being designated as investment warning issues recently, was introduced after the so-called "La Deok-yeon incident" in 2023. The La Deok-yeon incident used contracts for difference (CFDs) to induce a gradual rise in stock prices through long-term price manipulation.
If the share price of a particular issue rose more than 200% over the past year, the closing price on the day before designation corresponded to a record high among the most recent 15 closing prices, and on four or more days within the most recent 15 trading days the top 10 accounts' buy involvement ratio exceeded a certain threshold, it fell under the ultra-long-term rise and unsound conditions category and was designated as an investment warning issue.
The exchange will change the designation criteria for this category from a more than 200% rise in an individual issue's price over one year to a more than 200% rise in the individual issue's price relative to the increase in the respective market index.
Also, an issue that was designated and then delisted from the investment warning issues under this category will not be redesignated within 60 business days after delisting. The previous grace period was within 30 business days.
The exchange's Market Surveillance Committee said, "We will continue efforts to maintain the soundness of the capital market through meticulous market surveillance of unfair transactions in all issues, not only those exempted from designation as investment warning issues under the ultra-long-term rise and unsound category."