South Korea’s Financial Investment Industry Looking to Commercialize Unlisted Stock Trading through Blockchain

Oct 08, 2018

South Korea’s financial investment industry is planning to establish platforms for unlisted stock trading through blockchain technology.
Stock firms that trade stocks and bonds will participate in this project directly and apply blockchain technology to actual trading.
If blockchain trading is materialized in unlisted stocks, issuing companies will be able to issue, distribute, and mange stocks freely. Investors will also be able to do direct dealing of company stocks that are not registered at exchanges. It is expected that this project will be a first example to see whether blockchain can be spread to relevant industries.
According to financial investment industry, blockchain consortium made up of financial investment companies will begin ‘unlisted stock trading PoC (Proof of Concept) through blockchain’ sometime during this month. This project will have 20 stock firms participate and it will observe whether it is possible to actually trade unlisted stocks through blockchain technology. They will complete PoC sometime during the first half of 2019 and decide range of unlisted stock trading and go into commercialization.
This project is greatly meaningful from the fact that it has stock firms, which are major players in actual capital markets, participating. Although various blockchain companies tried to launch unlisted stock trading platforms in the past, none of them made meaningful results as they simply presented possibilities without having stock firms and investors that actually trade stocks and bonds in capital markets.
“Unlisted listed markets, unlisted stocks or unlisted bond trading does not require separate exchanges and they take place through auction-price trading or individual direct transaction.” said a representative for a financial investment industry. “Because stock trading is also becoming more active before IPO (Initial Public Offering) takes place, we can also expect profitability through this project.”

South Korea’s Financial Investment Industry Looking to Commercialize Unlisted Stock Trading through Blockchain

Consortium is also planning to focus on commercialization such as time it takes to sign orders due to unlisted stock trading through this PoC process.
Consortium’s goal is to first apply blockchain technology to unlisted stocks that are dealt through an over-the-counter stock asking price bulletin board called K-OTCBB operated by Korea Financial Investment Association. Practically every unlisted stock trading is possible through K-OTCBB unlike other over-the-counter markets such as K-OTC and KSM where particular unlisted companies are registered. When asking price is posted on K-OTCBB, deals are closed through one-on-one trading after discussing conditions such as amount and price through stock firms. Because real-time transactions do not take place unliked listed markets, it is simple to apply blockchain technology.
Consortium is also looking into applying blockchain technology to other over-the-counter markets after looking at how fast deals are closed on K-OTCBB. Its focus is on how fast each stock firm that is participating in its consortium can share information on transactions.
Consortium is planning to carry out PoC along with Korea Securities Depository that gathers and has various information according to issue of unified stocks. It is going to meet with Korea Securities Depository on the 8th and look at all sorts of matters such as liquidation settlements that can arise from blockchain-based unlisted stock trading. It seems that process of blockchain-based unlisted stock trading will accelerate as electronic stock system is scheduled to be in effective in 2019. Because ledgers are going to be completely electronic, it will become simple to manage information on transactions separately through blockchain technology.
“It is greatly meaningful from the fact that credible stock firms that participate in actual markets close deals through verifications.” said a representative for the blockchain consortium. “Not only this project will reduce various costs that are required for transactions, but it can also automate series of tasks through Smart Contract.”
Staff Reporter Ryu, Geunil | ryuryu@etnews.com

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