A roadmap to shorten the stock trading settlement cycle so investors can receive money the day after selling shares will be released in Oct.
The Financial Services Commission said on the 23rd that at a "capital market infrastructure innovation review meeting" chaired by Vice Chair Kwon Dae-young, it discussed measures to advance the securities transaction and settlement system infrastructure, including shortening the stock market settlement cycle.
Currently, when selling shares, the money can be withdrawn two business days later (T+2). The long wait to receive stock sale proceeds has fueled investor dissatisfaction. President Lee Jae-myung also said at a capital market meeting held at the Blue House in Mar., "I sold the stock today, so why is the money paid the day after tomorrow," calling for a reform of the system.
Vice Chair Kwon said, "Shortening the settlement cycle is a key reform task that can reduce risks between the transaction and settlement and free up liquidity tied up while waiting for settlement to improve market efficiency," adding, "We will prepare a detailed roadmap by Oct. to enhance the predictability of policy implementation."
Korea Securities Depository is piloting the construction of settlement infrastructure for over-the-counter transactions of unlisted shares and fractional investments within T+1, targeting completion by the end of this year. The goal is to move the timing of receiving stock sale proceeds from "two days later" to "one day later." A working group on shortening the settlement cycle, comprising Korea Exchange (KRX), Korea Securities Depository, and the Korea Financial Investment Association, will present prerequisite tasks needed to shorten the cycle and prepare a detailed roadmap by Oct.
Vice Chair Kwon said, "This will be a meaningful starting point to pre-test settlement innovation in an environment independent of the existing clearing and settlement infrastructure," stressing, "In the past, markets offering higher returns had the edge, but now how quickly and conveniently you can transact and settle, and how many different types of asset you can access, are also important criteria for market choice."
At the meeting, participants also discussed a plan for Korea Exchange (KRX) to gradually extend trading hours by launching an aftermarket on Sept. 14 and a premarket by the end of next year. In addition, in step with the artificial intelligence (AI) digital transformation of the capital market, they discussed advancing AI-based market surveillance systems and building a surveillance framework that effectively detects new types of abnormal transactions and signs of unfair trading.
Meanwhile, Vice Chair Kwon also mentioned "system stability and investor protection." Kwon said, "Innovation without ensuring market stability and trust is nothing but a castle in the sand," and asked that "IT departments of related institutions and industry groups work as one team to check risks and proactively respond to new risk factors arising from the spread of AI and changes in market structure, continuously improving the investor protection framework."