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Dual futures trading systems to be merged into single trading system.

The Financial Supervisory Commission (FSC) announced a proposal to integrate the dual futures trading systems of Korea Exchange into a single trading system in order to facilitate trading in futures and improve market efficiency. Currently, two different futures trading systems--KOSPI futures trading system and Korea Treasury Bond (KTB) futures trading system--that were used by Korea Stock Exchange (KSE) and Korea Futures Exchange (KOFEX) before they were brought under the Korea Exchange are in use.

Under the FSC proposal, tentatively set to be implemented by end of June this year, the KOSPI futures trading system is to be adopted at the Korea Exchange for all futures and options trading as it already effectively handles nearly all of the futures and options trading, including KOSPI 200 futures, KOSPI 200 options, Star index futures, and stock options. The KOSPI futures trading system also has the advantages of familiarity to investors, significant cost-effectiveness, and locally developed technologies.
Key changes under integrated futures trading at the Korea Exchange

              Current trading system              Proposed
              KTB futures       KOSPI futures     trading
              trading           trading           system

Trading       9:00 a.m.-        9:00 a.m.-        9:00 a.m.-
hours         3:00 p.m.         3:15 p.m.         3:15 p.m.

Types of      Limit order       Limit order       Limit order
orders        Market order      Market order      Market order

                                Conditional       Conditional
                                limit order       limit order

                                Best limit        Best limit
                                order             order

Closing/      Continuous        Periodic call     Periodic call
settlement    auction for       auction           auction
prices        closing price

              average (for
              the last one
              minute before
              market closing)
              for settlement

Margin        Fixed amount      Fixed percent     Fixed percent
requirement   (per contract)    (per contract)    (per contract)

                                                  Initial margin
                                                  to be required
                                                  for all futures
                                                  and options

Initial       No initial        Initial margin    Temporary
margin        margin            required          exemption to be
requirement   required                            given to
                                                  accounts for
                                                  KTB futures,
                                                  options on KTB
                                                  interest rate
                                                  futures &
                                                  options, and
                                                  gold futures

When the integration is completed, investors and traders are expected to benefit from simpler and more consistent trading rules while the Korea Exchange is expected to save 2.2 billion won in system maintenance cost a year.
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Title Annotation:Economic News Briefing
Publication:Economic Bulletin (Korea)
Article Type:Statistical data
Geographic Code:9SOUT
Date:Feb 1, 2007
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