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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.
Issuance, Transfer, Rights exercise
Issuance Transfer Rights exercise
  • Companies wishing to issue electronic securities should notify the issuance details to the electronic registrar.
  • Once the electronic registrar and account manager (financial investment company, etc.) register the issuance details in an investor's account, the issuance of electronic securities is completed.
  • On the application of the transferor, the electronic registrar or account manager register book-entry transfer into the transferee's account.
  • Investors can exercise various rights related to electronic securities, such as receipt of dividends, and principal and interest, directly or through the electronic registrar or account manager.

Benefits of the electronic securities system

  • Reduced cost of securities issuance and circulation
    • Issuers:

      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.