At a forum on "shortening the securities market settlement cycle (T+1)" jointly hosted on the 26th by Korea Exchange (KRX), the Korea Securities Depository, and the Korean Securities Association, consensus formed that Korea's capital market should also move to shorten the settlement cycle in line with the global trend. However, the securities industry, citing system stability and the structure of the foreign exchange market, stressed that a cautious approach is needed, saying "stable implementation should come before speed."
Jung Eun-bo, chair of Korea Exchange (KRX), said in welcoming remarks that "shortening the settlement cycle is not a choice for some markets but a new standard for global capital markets," adding, "our capital market must establish transaction, clearing, and settlement environments that meet global standards." The United States shifted to a T+1 regime last year, and Europe and Hong Kong have released their implementation schedules, he said, explaining that the domestic market should focus on the actual timing and method of adoption.
Park Yong-jin, vice chair of the Regulatory Rationalization Committee, also said, "In reality, it takes two business days from selling a stock to when the money actually comes in, and four to five days if a holiday intervenes," emphasizing that "shortening the settlement cycle is about returning individual investors' freedom to manage their funds."
Korea Exchange (KRX) and the Korea Capital Market Institute explained the need for T+1 and its expected benefits. Choi Hoon, Director General of KRX's Clearing and Settlement Division, said, "Now the question is not 'whether' but only 'when and how,'" naming back-office automation and cooperation among market participants as key tasks.
Roh Sung-ho, a research fellow at the Korea Capital Market Institute, assessed that shortening the settlement cycle can reduce settlement risk and improve investor liquidity, but noted that as back-office processing time is effectively cut by more than half, the possibility of settlement failures could increase.
In particular, overseas institutional investors could see their actual processing window compressed to about five to seven hours due to time differences, and because the global foreign exchange settlement system (CLS) still operates on T+2, mismatches could arise between foreign investors' FX funding and stock settlement times. Citing India's example, he said that right after T+1 was introduced, there were declines in foreign capital inflows and a widening of bid-ask spreads.
Still, while foreign institutions and the securities industry agreed on the need for early adoption, they argued that ample preparation time is necessary. Noh Seung-jin, head of settlements at Mirae Asset Securities, said, "Foreign investors still rely on manual, paper-based settlement processes," adding, "if automation is not in place, settlement delays can immediately lead to failed settlements."
Cho Eun-a, head of IT infrastructure at SK Securities, said, "T+1 is not a simple schedule change but a level that requires a complete redesign of securities firms' systems," explaining that full-scale revisions are needed for ETF creation and redemption, securities lending transactions, margin shortfall and forced sale systems, and customer asset valuation frameworks. She added, "It is more important to first establish conditions for stable implementation than to focus on speed itself."
Standard Chartered Bank Korea, which handles agency business for foreign investors, also raised concerns about time differences and the structure of the FX market, warning that "if only the settlement cycle is shortened without building automated infrastructure, market credibility could be damaged."
Representing the foreign investment industry, Lyndon Chao, managing director at the Asia Securities Industry and Financial Markets Association (ASIFMA), said, "Korea is already a market where the settlement failure rate is effectively 0%," adding, "unlike the United States and Europe, where failure rates are high, the benefits of adopting T+1 may not be large."
He cited limits on offshore won liquidity, insufficient access to the FX market, and an investor ID-based settlement structure as key burdens, arguing, "Rather than unconditionally following the United States, we should approach this in a way that fits the structure of Korea's market."
Financial authorities agreed on the need for adoption in line with global trends but said they would balance speed and stability in light of market specifics. Ko Young-ho, head of the Capital Markets Division at the Financial Services Commission, said, "As most global markets have already adopted or are pushing ahead, Korea should pursue the transition while minimizing expense," adding, "we will discuss a roadmap with related institutions, industry, and investors."