Introduction of Electronic Securities System
Under the electronic securities system, securities certificates of shares and bonds are not issued in physical form, and subsequent rights are recorded on an electronic register, allowing investors to acquire, transfer and exercise the rights electronically.
Operating structure of electronic securities system
- Investors can acquire, hold, and transfer securities through accounts opened at financial investment companies.
- International organizations such as G-30, BIS, IOSCO and ISSA recommend the adoption of an electronic securities system. Many markets countries including U.K., France and Japan have already adopted such systems to advance their capital markets.
- After various discussions on the adoption of the electronic securities system in Korean market, the electronic short-term bond system was implemented in January 2013, and legislation for the introduction of the system has been promoted in stages.
Benefits of the electronic securities system
- Reduced cost of securities issuance and circulation
It streamlines stock issuance procedures and reduces financing costs, with estimated savings at KRW 87 billion for the first five years.
- Financial institutions:
It reduces the cost and time associated with handling physical securities certificates, with monthly time-saving estimated at 300,000 hours.
- Enhanced investor rights and convenience
It prevents counterfeiting, alternation, robbery and loss associated with physical certificates. Since investors do not need to individually transfer the title of the securities, exercising rights becomes more convenient.
- Enhanced transparency of securities transactions
It facilitates the tracking of securities issuance and circulation, since the amount of issued securities, and securities portfolio and transaction details of each investor are managed electronically, making the securities market more transparent.