&#91EDITORIALS&#93Don’t mix politics, securities

The government is set to consolidate the main stock exchange, the secondary Kosdaq market and the futures exchange, and move the combined headquarters to Busan. We believe that this was a political compromise and not a well-thought-out plan to improve the backward nature of Korea’s securities market.
The larger two of the three markets are located in Yeouido, Seoul, with most of the trades coming from within the city and in the capital region. With that kind of market participation, it is incomprehensible why the head offices would have to be located in Busan. Of course in the age of Internet communication and with the importance of balanced development of regional centers and economy, an argument can be made for a relocation of the head offices anywhere in the country. But with most of the securities industry’s participants and activities being in Seoul, it makes little sense in terms of efficiency or very much else to move the market’s strategic operations, human resources, research activities and audit functions to Busan. The city has been fiercely opposed to the idea of consolidating the markets, fearing cuts to the futures exchange’s scale and functions. That makes it likely that the government’s plan for the move was not based on economic reasoning; it makes for a good argument that the government was eyeing the Busan vote in the general election coming up next year.
It took a few years of arguing before settling on the location for the futures exchange before it opened in 1999. The selection of Busan was made on political grounds, and there is no question it was far from the optimal choice. The plan to reorganize the securities and futures markets can very well meet the same fate depending on how it is undertaken from the very beginning. There will likely be years of debate among stakeholders.
There is still a long way to go to improve regulations and the market’s functions, and much work to be done to make the securities industry competitive. There is no place for political considerations and selfish regionalism in reforming the securities industry.