KRX mulls overhaul of daily limits

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KRX mulls overhaul of daily limits

Korea’s stock market operator said yesterday it is considering greatly easing daily price limits on shares or abolishing them altogether in an effort to give more leeway to investors.

“We are considering abolishing or expanding the daily fluctuation limits on local shares, as the market has grown enough to also consider efficiency rather than just stability,” an official from the Korea Exchange (KRX) said.

The country’s main bourse and the secondary market currently enforce daily price ceilings by stopping transactions of listed firms whose share prices surge or fall by 15 percent to prevent drastic fluctuations.

The deregulation plan came as the price limits are under fire for providing a safety net to speculators, while making the local stock market less attractive than global peers, market watchers said.

Meanwhile, local brokerage houses said the deregulation plan may have an adverse impact on firms that lack liquidity, prompting excessive price fluctuations down the road.

“Although deregulation may ease the price distortion on the stock market, there should be a precautionary measure to secure liquidity for companies which depends heavily on major shareholders,” said Park Seung-young, an analyst at Taurus Investment & Securities.

The KRX added it plans to prevent potential side effects of deregulation by implementing circuit breakers for individual listed firms, stopping their trade for less than a minute in case of excessive fluctuations.

The breaker is currently triggered on the index as a whole when it falls more than 10 percent for over a minute, suspending all trading for 20 minutes. It can only be activated once in a trading session.

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