Korea Exchange and Korea Securities Depository restructured the settlement period shortening working group into task forces on the 20th. According to the financial investment industry on the 24th, the decision aims to organize prerequisite tasks for transitioning to T+1 stock settlement. The working group held a meeting on the 20th with participants including the exchange, depository, financial authorities, domestic securities firms, and foreign financial institutions (custodians), where discussions advanced on practical tasks for preparing a settlement period shortening roadmap based on opinions collected. The restructuring addresses infrastructure and system improvement tasks needed to align South Korea's stock market settlement cycle with global markets like the United States, while financial authorities target October for presenting the roadmap.
Working Group Restructures into Four Task Forces
The working group will operate through a subdivided task force structure. Four task forces will be formed: a market settlement team centered on the exchange, an institutional settlement team centered on the depository, a custody team focused on custody operations, and a regulatory framework team addressing regulatory aspects. The working group moves beyond discussing the necessity of settlement period shortening to organizing system and infrastructure improvement tasks related to settlement procedures in business operations. Approximately 20 domestic securities firms of various sizes will participate, and the Korea Financial Investment Association will share progress with all members.
Financial Authorities Target October for Settlement Roadmap
Financial authorities plan to present a settlement period shortening roadmap targeting October. The working group will finalize selection of a professional consulting firm and continue organizing detailed tasks to be reflected in the roadmap centered on the task forces. The working group has led settlement period shortening discussions since the second half of last year. In May, it held a forum where academia, industry, related organizations, and individual investors participated to collect opinions on major issues.
Working Group Conducted Discussions Since Last Year
Settlement period shortening is regarded as synchronizing the domestic stock market's timeline with the pace of global capital markets, including advanced markets like the United States. However, since settlement operations involve interconnected systems of numerous institutions, infrastructure restructuring burdens exist alongside risk factors such as settlement failures. Improving foreign exchange market accessibility for foreign investors' settlement fund currency conversion is also cited as a major task.
Industry Raises Infrastructure and Stability Concerns
The working group will operate with focus on preparing transition timing and implementation plans that market participants can accept. Consensus formed that the roadmap containing implementation timing should be established considering system compatibility and sufficient testing periods. Concerns were raised that forcing premature implementation could differ from original goals in terms of investor impact and market stability. A financial investment industry official stated, "While we sympathize with the purpose of settlement period shortening, infrastructure modifications that significantly impact the market require multiple tests even for small changes." The official added, "Even with thorough preparation, various risks can arise," and "If problems occur while pushing schedules too tightly, all investors could suffer damage."
FAQ
What did Korea Exchange and Korea Securities Depository decide on the 20th regarding stock settlement?
Korea Exchange and Korea Securities Depository decided to restructure the settlement period shortening working group into function-based task forces. The restructuring includes four teams: market settlement, institutional settlement, custody, and regulatory framework, with approximately 20 domestic securities firms participating.
Why is South Korea shortening the stock settlement period to T+1?
The settlement period shortening aims to align South Korea's stock market timeline with global capital markets' pace, matching advanced markets like the United States. Financial authorities target October for presenting a detailed roadmap for the transition.
