Consolidation of Three Exchanges Planned for December
- The vision and tasks of the integrated exchange discussed in an int'l seminar

The Korea Stock Exchange (KSE), the Kosdaq Stock Market, and the Korea Futures Exchange (KOFEX) will be integrated into one bourse, to be headquartered in Busan, in December as planned. Choi Sang-mok, director of the Securities Policy Division at the Ministry of Finance and Economy (MOFE), said, "The process for selecting the president of the merged exchange is to be launched soon, so the planned merger of the three exchanges will be made this year without a hitch." He noted that the merged bourse should bring efficiency through new ways of thinking on the top of the central government's support for institutionalizing it. Choi made the remark during an international seminar marking the merger of KSE and KOFEX, held on October 8 at BEXCO in Busan.

Kwon Young-jun, professor of Kyunghee University, said Korea's consolidating three stock markets with their respective own nature is bound to contain differences, so participants of the markets should join forces in the integration process after putting behind interests because the integration issue should be handled from the viewpoint of realizing a vision of making Korea an economic hub of Northeast Asia, rather than from the political perspective. With regard to this end, he said, authorities concerned are required to iron out differences on issues like taxes on derivatives.

Sohn Bok-jo, president of Daewoo Securities Co., said the purpose of the merger is aimed at raising operation efficiency and reducing costs. If (the integrated bourse) is armed with the hardware, but not with software necessary for realizing the purpose of the consolidation, it could end up in failure. One of the problems facing the financial community is how to solve responsibilities being overlapped between the KSE and KOFEX, he said.

Kim Gwang-lim emphasized in his keynote speech that the nation would have to attain the advancement of the financial market through consolidation, linkage and a shift into a client-oriented mode to cope with a rapidly changing financial environment.

Taking for instance the establishment of SGX, Asia's first integrated securities and derivatives exchange, Hsieh Fu Hua, chief executive officer of SGX, cited such essential tasks as the realization of the synergetic effects of the consolidated markets, realignment of regulatory systems and a shift into a customer-oriented organization. He noted a successful integration of exchanges is required to take a risk-taking approach with conviction and passion. The exchange increasing transaction fees in a bid to raise its income would be considered a failed model case under the long-term perspective. Improved market efficiency through a reduction in transaction fees could contribute to raising its profits from a long-term perspective.

SGX, inaugurated in December 1999 by merging the Stock Exchange of Singapore (SES) and the Singapore International Monetary Exchange (SIMEX), hired outside consultants through whom it found a rational approach aimed at integrating two different organizations, and it exerted itself to harmonizing them through personnel exchanges of staff members and appropriate compensation following the merger, Hsieh said. Hsieh said SGX is trying to function as a full-fledged financial hub by making efforts to list more foreign companies on the bourse and expand the scope of derivative products put on the market. He said the number of foreign companies listed on SGX stood at 591, accounting for 26 percent of the total listed companies, with the aggregate value of listed stock amounting to Singaporean $424 billion, taking up a 39 percent portion of the total amounts. In 2004, 27 newly listed foreign companies have surpassed 20 domestic companies listed on the SGX, he said.

SGX has forged an alliance with Australian and Malaysian counterparts under which the shares of the countries are transacted on the Singaporean bourse, said Hsieh, adding that he expressed the hope SGX is seeking to team up with Korea.

Scott Robinson, managing director of corporate development at CME, seeing the potential to maintain a growth of the derivatives market, said, "CME is now the largest futures exchange in the United States and the world's largest clearing house for futures and options on futures contracts. In 2003, a record 640 million contracts with an underlying value of $334 trillion changed hands at CME. This represents the largest notional value traded on any futures exchanges in the world. We trade more in notional value in the first two weeks of the year than the New York Stock Exchange trades annually"

Robinson said, "The first lesson CME has learned is the importance of boldness and innovation. By remaining true to our innovative spirit, CME has become a leader within the derivatives industry" he said.

He also cited the importance of increased market and access and the creation of a truly global derivatives marketplace as the second lesion. "By expanding its product base, through new products such as ETFs, and MOU agreements throughout the world, such as those with the NYSE and TOCOM, the new consolidated Korean exchange continues to increase its imprint on global derivatives markets" he said   nw