By Anna J. Park
Fractional trading of Korean shares will be possible from the second half of 2022. Fractional share trading means an investor owns a fraction or a portion of a company’s share, instead of a full share.
The Financial Services Commission announced Sunday that it aims to change the system to introduce fractional trading for Korean stocks by the second half of next year.
Currently, fractional trading is possible at some local brokerages, but only for shares listed in exchanges overseas. Back in 2019, the FSC allowed Shinhan Financial Investment and Korea Investment & Securities to launch fractional trading of overseas shares.
Fractional share trading is expected to be expanded to all brokerages, beyond the current two as early as this year, but trading of Korean shares will require more time to be authorized due to the need for legal and systemic tweaking.
It is still not possible to divide ownership of a domestic share, according to the Commercial Law. The FSC plans to revise that law and implement systemic changes to introduce the trading system.
The FSC says one of the main reasons for allowing fractional trading is to provide a wider chance for retail investors with small budgets to invest in quality companies. The smallest unit of the fractional trading is expected to be 0.000001 share. Various other innovative investment products are also expected to be launched using fractional trading.
Owning a fraction of a full share entails almost the same rights as other shareholders, including the right to receive dividends proportionate to their ownership stake. But they will not receive voting rights.
“The FSC plans to examine necessary regulatory revisions reflecting calls from both the industry and consumers to introduce fractional trading,” an official from the commission said, adding that the trading system will lower the bar for retail investors to access quality shares.Internet Explorer Channel Network