IMC Trading logo (Captured from IMC Trading website)
Dutch brokerage company IMC Trading said on March 12 that it would move ahead with its plan to enter the South Korean market, denying local reports that suggested the firm was backpedaling due to regulatory issues.
“The message (report) that IMC has withdrawn its license application is false and we are not in a position to further comment while our license application is pending with the regulator,” an official at the headquarters of IMC Trading in Amsterdam told The Korea Herald.
After clinching preliminary approval from the Financial Supervisory Service in January, the trading firm filed an application to get the final nod to open its Korean unit, tentatively named IMC Securities Korea, as a financial investment and brokerage business.
IMC Trading is the first foreign securities company seeking to join the Seoul bourse as a market marker in more than 3 1/2 years. China Merchants Securities won approval in June 2017.
Earlier this week, Korean news outlets reported that IMC Trading was considering withdrawing its application partly over the government’s plan to significantly reduce tax benefits for market makers from next month.
As of press time, the Financial Supervisory Service could not be reached for comment.
Under the new rule, market makers will no longer be able to enjoy tax exemptions on transactions of stocks that have a high turnover rate or those with a market cap of over 1 trillion won ($884.8 million).
Market makers are designated by the government to encourage market liquidity by standing ready to buy and sell securities at any time of day. But critics say they are mainly engaged in large-cap stocks with a large volume of transactions and rich liquidity, rather than small and medium-sized stocks that have insufficient liquidity or trading volume.
On the other hand, security firms asserted that the new rule could result in lower profit margins, discouraging them from carrying out market-making activities.
The move has also drawn concerns that the Korean stock market could lose its appeal to foreign trading firms, thwarting the country’s drive to become Asia’s next financial hub.
Park Chang-gyun, a senior analyst with the Korea Capital Market Institute, said market makers are taking risks by purchasing less attractive stocks and that compensation could take the form of a tax exemption.
“But I don’t think that giving a tax break or not is a decisive factor for foreign firms to change their fundamental view on the Korean market,” Park said.
A total of 22 security companies have been designated as market makers here, including foreign firms such as SG Securities Korea, CLSA Securities Korea and the Seoul branch of the Goldman Sachs Group.
By Park Han-na (email@example.com)