In response to a recent increase in stock market volatility, the financial authorities held a market monitoring meeting on July 1 and decided to take measures to mitigate market volatility.
(a) Requirement for securities firms to maintain a certain level of collateral ratio on their credit loans will be exempted for three months starting from July 4, which may be extended if needed.
(b) Caps on the amount of daily buy orders for acquisition of treasury stocks by listed companies will be eased for three months starting from July 7, which may be extended if needed.
(c) The FSS and KRX will jointly conduct a special inspection on short-selling practices.
Financial authorities will continue to monitor financial market conditions, holding a joint market monitoring meeting on a weekly basis, and consider or implement market volatility mitigation measures, if needed, in accordance with contingency plans.
Background
With the KOSPI falling below 2,300 points during intraday trading on July 1, Korea’s stock market has shown continued and increasing volatility on concerns over rising interest rates, expanding inflation, possibility of a global economic recession, etc.
Although increased stock market volatility will be inevitable for a while, given macroeconomic conditions at home and abroad, it is necessary to stay alert about the spread of excessive market anxieties.
Measures To Mitigate Stock Market Volatility
The FSC and FSS held a joint market monitoring meeting with relevant securities institutions chaired by FSC Vice Chairman Kim So-young to examine financial market conditions after the market closing on July 1, and decided to implement the following measures to mitigate market volatility.
(a) For three months from July 4 to September 30, which may be extended if needed, securities firms will be exempted from a requirement to maintain a certain level of collateral ratios on their credit loans in order to ease concerns about a surge in forced liquidation with declining stock markets. (The FSS has issued a no-action letter on July 1)
(b) For three months form July 7 to October 6, which may be extended if needed, current caps on the amount of daily buy orders for acquisition of treasury stocks by listed companies will be eased. (The FSC will approve the measure at its regular meeting on July 6)
(c) The FSS and the Korea Exchange (KRX) plan to jointly conduct a special inspection on short-selling practices to check the current state of short-selling practices and any possibility of market disruptions.
The FSC and the FSS will hold a regular market monitoring meeting on every Friday to monitor financial market conditions and consider or implement market volatility mitigation measures, if needed, according to contingency plans.
* Please refer to the attached PDF for details.