The Securities and Exchange Act governs all aspects of securities trading and exchange operations.
Secondary trading is conducted through the Korea Financial Investment Association’s (KOFIA) over-the-counter (OTC) market, or the Korea Exchange (KRX) submarkets—the interdealer market (IDM) and the general bond market (GBM).
Over-the-Counter Market
OTC trading is self-regulated and operates under KOFIA guidelines. All types of bonds can be traded on the OTC market, regardless of whether they are listed on KRX. Price and unit volume, for example, are normally negotiated between sellers and buyers, and allowed at any time of the day. Institutional investors—such as banks, securities companies, investment trust companies, insurance companies, and pension funds—are allowed to trade on the OTC market with no membership requirements. KOFIA disclosure requirements can be found by following the links provided below.
Korea Exchange
IDM is a wholesale market where authorized dealers trade government bonds among each other. GBM is a retail market where individual investors trade all types of fixed-income securities, including convertible bonds. IDM and GBM offer competitive trades in listed bonds. In principle, only securities companies are allowed to participate in the KRX market. However, access to IDM is open to both banks and securities companies irrespective of KRX membership, as long as they are licensed as government bond dealers by the Financial Supervisory Commission (FSC). Additional information on IDM and GBM is provided at the KRX website, which is linked below.
Trading, listing, and disclosure regulations of exchange market are also available through the links below. All bonds must meet listing requirements, except government and public bonds.
Korea Exchange—Futures Market Division
Foreign investors must designate custodian banks through custodian bank agreement and standing proxy agreement to trade futures and options contracts listed on KRX. Investment procedures for the Republic of Korea's futures market are listed at the website linked below.