SOUTH KOREA Law and Practice Contributed by: Jongbaek Park, Seungil Hong, Seyeong Im and Eric Jeong, Bae, Kim & Lee LLC
Under the revised Regulation, “high-speed algorithmic trade” is defined as any algorithmic trade conducted: • by installing an exclusive ordering system owned or directly controlled by an investor at the IT (com - puting) centre of a KRX member; or • as proprietary trading by a KRX member firm. Any investor that intends to entrust a KRX member to place orders for high-speed algorithmic trading must be registered as a high-speed algorithmic trader with the KRX, and any KRX member that intends to engage in “high-speed algorithmic trade” itself must file a report as a high-speed algorithmic trader in advance. If an investor is not registered as a high-speed algo - rithmic trader, the KRX member must refuse to accept the “high-speed algorithmic trade” order. Notably, different asset classes do not have different regulatory regimes. Only licensed investment dealers or brokers are gen - erally permitted to act as market makers under the FSCMA. The market making system is aimed at increasing the market liquidity of a target security with poor liquidity as chosen by the KRX. A market maker enters into a market-making agreement with the KRX to continu - ously offer to both buy and sell the target securities. It should be noted that only KRX members that are investment dealer-brokers can become market mak - ers. 7.3 Regulatory Distinction Between Funds and Dealers The regulations on “high-speed algorithmic trade” by the KRX do not distinguish between funds and deal - ers. 7.4 Regulation of Programmers and Programming 7.2 Requirement To Be Licensed or Registered as a Market Maker When Functioning in a Principal Capacity There is no law or regulation that directly applies to programmers who develop and create trading algo - rithms and other electronic trading tools. However,
they may be found guilty of being an accomplice to any act generally prohibited by the FSCMA, such as price manipulation or market disturbance depending on their specific conduct and be penalised accord - ingly.
8. Insurtech 8.1 Underwriting Processes
Any person who wishes to sell insurance products has to be registered with the FSS as an insurance agent, insurance solicitor or insurance broker and comply with the relevant regulations under the Insurance Busi - ness Act. The sale of insurance products to customers is also governed by the Financial Consumer Protec - tion Act, as described in 4.1 Differences in the Busi - ness or Regulation of Fiat Currency Loans Provided to Different Entities . The underwriting processes may include gathering financial records and personal data to determine the risk profile of the customer and set insurance premi - ums. The use of an automated data processing meth - od in the underwriting process is increasing, which highlights the growing importance of data protection and privacy laws. 8.2 Treatment of Different Types of Insurance Under the Insurance Business Act, there are three types of insurance business: • life insurance business; • non-life insurance business; and • type 3 insurance business. A person who intends to engage in insurance busi - ness has to obtain a licence from the FSC according to the types of insurance business, and the capital and fund requirements vary depending on the type of insurance business. In principle, insurance companies are prohibited from concurrently operating a life insurance business and a non-life insurance business. However, operating both types of insurance business is allowed if it involves a parent company or its subsidiary.
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