Korea Exchange
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WATCH: Korea Exchange’s Jae-Joon Lim Discusses OTC Clearing and Kospi Contracts on MarketsWiki.tv (July 2012) |
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| Korea Exchange (KRX) | |
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| Founded | 2005 |
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| Headquarters | Busan, S. Korea |
| Key People | Chairman and CEO Bong-soo Kim |
| Products | KRX KOSPI 200 Index derivatives |
| Corporate Website | www.eng.krx.co.kr |
The Korea Exchange (KRX) was formed in 2005 from the merger of four domestic Korean exchanges, but has since grown rapidly.
According to the Futures Industry Association 2012 exchange report, KRX was the world's fifth leading derivatives exchange measured by trading volume. Total volume traded by the exchange in 2012 was 1,835,617,727, down 53.3% from the previous year. [1]
The exchange's derivatives volumes are driven by the Kospi 200 Index options and Kospi 200 Index futures contracts. Until 2012, the Kospi 200 Options contract was at the top of the FIA's volume tables for almost a decade, becoming the most actively traded derivatives contract in the world in 2011 with 3.67 billion contracts traded.[2] However, in 2012 the Korean authorities decided that too many retail investors were speculating in various ways on the direction of the stock market, so they quintupled the index multiplier, making the contract five times more expensive to trade, according to Futures Industry Magazine.[3]
Background
KRX was formed on Jan. 27, 2005, from the merger of the Korea Stock Exchange (KSE), the Korea Futures Exchange (Kofex), the Kosdaq Market and the Kosdaq committee, part of the Korea Stock Dealers' Association. It provides an electronic platform for the trading, clearing and settlement of cash equities, bonds and derivatives. Ownership was split in 2007 between 44 financial and government entities, led by Woori Investment Securities (6.3 percent); Daewoo Securities (3.2 percent) and Daishin Securities (3.2 percent). Overseas owners include JP Morgan, Citigroup and Australia's Macquarie Bank.[4]
The Korea Exchange was the world's busiest in 2009, according to the annual Futures Industry Association's survey of the world's leading derivatives exchanges. [5] The FIA report, published in early April, 2010, notes that the number of futures and options traded on the Korea Exchange rose 8.3% on the 2008 figure to hit 3.101 billion, topping larger rivals Eurex and the CME Group. The Korea Exchange's Kospi 200 Options (KRX) also headed the FIA's list of the wold's top-20 equity index futures and options with 2.921 billion options traded, up 5.6% on the 2008 figure.
In mid-2009 KRX announced a program with the Laotian government to establish a stock exchange there in return for a 49 percent stake,[6] marking the third exchange in the Mekong region that the KRX had helped establish. Cambodia will begin construction on its first stock exchange in December of 2009, 49% of which will be held by KRX. The Cambodia exchange plans to launch with four or five companies issuing about $10 million worth of shares each.[7]. KRX has a similar agreement in Vietnam.
Korea Exchange reported in October 2009 that its most capitalized companies have seen their share prices rise by more than 50% since the beginning of 2009.[8] Stocks in the medical sector saw the highest growth at nearly 200% while telecom stocks fell nearly 10%.
Key products
The Korea Exchange's main benchmark stock index is the KRX KOSPI 200 and listed futures and options contracts tied to its value are the world's most-traded derivatives contracts, according to the Futures Industry Association.
Key people
On December 30, 2009, Bong-soo Kim became Chairman and CEO of the KRX after a two-month search for a new leader. Kim was the former president of Kiwoom Securities Company, one of the member firms of KRX, and took over as CEO of KRX after the sudden departure in October 2009 of previous KRX head Lee Jung-Hwan, [9] who had been at the top job for only eight months after joining the exchange in early 2005.[10]
Contract Volume
| Year | Total Annual Volume* | Percent Change | World Ranking |
| 2012 | 1,835,617,727 | (-) 53.3% | 5 |
| 2011 | 3,927,956,666 | (+) 4.8% | 1 |
| 2010 | 3,748,861,401 | (+) 20.8% | 1 |
| 2009 | 3,102,891,777 | -- | -- |
Joint Ventures
KRX expanded its position in the international derivatives market through partnerships with Eurex and the CME Group, to distribute and allow trading in options and futures respectively on its benchmark KRX KOSPI 200 stock index.
In November 2009 KRX launched a joint agreement with Chicago-based CME Group to provide after-hours electronic trading access to KOSPI 200 Futures contracts via the CME Globex platform.[11] KRX and the CME also agreed on a bi-directional order-routing system similar to that successfully implemented between the CME and BM&FBOVESPA, Brazil's largest securities-trading exchange. Phase one of the agreement between KRX and CME will give KRX clearing members access to the KRX KOSPI 200 Futures market via the KRX's Unifies System for Global Trading (USG) trading platform. Direct access to the market via CME Globex will be offered in later stages as regulatory approval is obtained. CME also offers members trading the Kospi futures a give-up/take-up functionality, which allows member firms to transfer positions to one another on an intra-day basis.
In August 2010, KRX began listing its Kospi 200 options contract, also during non-Korean market hours, on Eurex. The partnership allows Eurex members to trade and clear Kospi 200 options during European and North American trading hours. The Eurex Kospi product is a daily futures contract based on the Kospi 200 options. These futures contracts expire at the end of each trading day and open positions are transferred to KRX in the form of a Kospi option. [12]. Fifteen KRX members and 16 Eurex members say they will be ready to trade the Eurex KOSPI Product during the course of 2010.[13] IMC and Archelon have signaled their interest to actively quote as market makers.
John Lothian Newsletter Interview
Korea Exchange’s Jae-Joon Lim Discusses OTC Clearing and Kospi Contracts
Jae-Joon Lim is director, business development at Korea Exchange, home of the most traded contract in the world, the Kospi futures and options. At the 2012 Emerging Manager Forum in London, Lim discussed the Kospi, as well as OTC clearing of Korean yun denominated interest rate swaps, due to launch this fall. Interview by John Lothian News editor-in-chief Jim Kharouf. Published July 25, 2012. Watch at MarketsWiki.tv[14]
KRX Product Announcements
KRX announced on July 28, 2010 that it would launch Korea's first-ever mini-sized derivatives contract, Mini Gold Futures, for trading on September 13 2010.[15] The trading unit for contracts will be 100 grams of 99.99% purity refined gold and final settlementprice will be determined based on the London Gold AM Fixing Price.
KRX expects the Mini Gold Futures contract will appeal as a risk management tool for smaller-scale manufacturers, wholesalers, retailers and retail investors in the precious metal. Officials at the Korea Exchange also expect the contract to provide greater greater transparency to the local gold-trading market and also drive demand among Korean investors for global gold-futures contracts.
Key contracts
The following contracts listed on KRX have MarketsWiki entries:
- KRX KOSPI 200 Index futures
- KRX KOSPI 200 Index options
- KRX KOSDAQ STAR Index futures
- KRX Individual Equity Options
- KRX 3-Year Korea Treasury Bond futures
- KRX 5-Year Korea Treasury Bond futures
- KRX 10-Year Korea Treasury Bond futures
- KRX Monetary Stabilization Bond futures
- KRX US Dollar futures
- KRX US Dollar options
- KRX Japanese Yen futures
- KRX Euro futures
- KRX Gold futures
There are no restrictions on foreign individuals trading contracts listed on the KRX.
References
- ↑ FI Volume Survey 2012. FIA.
- ↑ KRX Futures Summary. KRX.
- ↑ FI 2012 Volume Survey. FIA.
- ↑ KRX 2006 Business Report. KRX.
- ↑ 2009 Annual Volume Survey. FIA magazine.
- ↑ S. Korea to help set up stock exchange in Laos. China Post.
- ↑ Construction of Cambodian bourse to begin in Dec. Forbes.
- ↑ Rising tide lifts leaders, runners-up. Joongang Daily.
- ↑ 'Too Many Bureaucrats in KRX'. Korea Times.
- ↑ Korea Exchange CEO Leads Through Downturn. Wall Street Journal.
- ↑ CME Group, KRX Announce After-hours Access to KOSPI 200 Futures on CME Globex. CME Group.
- ↑ Korea Exchange and Eurex Receive Strong Support from Major Market Participants for Their Link. Deutsche Borse Group.
- ↑ Korea Exchange and Eurex Receive Strong Support from Major Market Participants for Their Link. Deutsche Borse Group.
- ↑ Korea Exchange’s Jae-Joon Lim Discusses OTC Clearing and Kospi Contracts. MarketsWiki.tv.
- ↑ Korea Exchange To List Mini Gold Futures On September 13, 2010. Exchange News Direct.
Resources
- The Kospi Show. SFO Magazine.
- Future Shock!. Korea Trade Investment Promotion Agency.
