South Korea's Financial Services Commission (FSC) announced on the 15th that investors who are not allocated shares in initial public offerings (IPOs) will receive interest on their subscription deposits, alongside planned reductions in margin loan rates. FSC Chairman Lee Eok-won stated in a presidential briefing that the measures aim to 'create a Global Best capital market that citizens can feel,' addressing 'inconvenient and irrational structures in the investment process.' Assuming a 1% annual interest rate on approximately ₩450 trillion in IPO subscription deposits locked for three days, investors could receive over ₩30 billion annually after underwriting costs, while a 1 percentage point reduction in margin loan rates — currently averaging 9% — would cut annual interest burdens by over ₩17 billion based on an average balance of ₩1.7 trillion.
FSC Announces IPO Subscription Deposit Interest Payment System
The FSC plans to reform the system so that underwriters (securities firms) return subscription deposits with interest to investors who are not allocated IPO shares. The initiative aims to redistribute a portion of the profits underwriters earn from managing subscription deposits to individual investors. Ko Young-ho, director of the FSC's Capital Markets Division, explained that 'investment deposits have the same legal nature as IPO subscription deposits, and interest is paid there under the name of deposit usage fees,' adding that 'the concept is to return the remaining profits from IPO operations to individuals after accounting for costs incurred during the subscription process.'
IPO subscription deposits amount to approximately ₩450 trillion annually. Assuming a 1% annual interest rate on deposits locked for three days, ₩37 billion in interest would be generated. Even after deducting underwriters' subscription-related costs, over ₩30 billion in annual interest could be returned to investors, according to FSC calculations. The commission will determine whether to pursue amendments to the Capital Market Act — where a bill enabling interest payments on IPO subscription deposits is already pending in the National Assembly — or implement the change through other regulatory revisions.
Margin Loan Rate Reduction Targets 9% Average Rate
The FSC is also pushing to lower margin loan rates. Deputy Commissioner Shin Jin-chang noted that 'after selling stocks, investors do not receive the proceeds for two days, and during that period they take out margin loans at an average annual rate of 9%, which is higher than in Japan,' adding that 'even if settlement cycle shortening is implemented next year, we will lower margin loan rates in the meantime so that investors can access funds.'
The FSC will review the appropriateness of the margin loan rate calculation system and consider restructuring the system if necessary. The commission's concern is that securities firms are setting high rates despite holding stable collateral in the form of stock sale proceeds. Based on an average margin loan balance of ₩1.7 trillion, reducing the average annual rate from 9% to 8% would result in ₩17 billion in annual interest savings.
Stock Settlement Cycle Shortening to T+1 Scheduled for H2 Next Year
The FSC plans to shorten the stock settlement cycle from the current T (trade date) + 2 days to T+1 during the second half of next year. Deputy Commissioner Shin stated in a media briefing following the presidential report that 'we will present a roadmap by October this year, and the actual settlement cycle shortening will be implemented as early as the second half of 2027,' adding that 'there are many things to confirm, and we will carefully prepare and implement it to eliminate settlement failure risks.'
Market Manipulation Crackdown and Leverage ETF Review in F4 Meeting
The FSC reaffirmed its policy of strictly responding to market disruptions such as stock price manipulation to protect individual investors. In particular, the commission will strengthen monitoring and sanctions against the dissemination of false information or exaggerated disclosures. It also plans to block illegal activities by so-called 'finfluencers' (financial and investment influencers).
Regarding single-stock leverage exchange-traded funds (ETFs), which have been criticized for increasing stock market volatility, the FSC stated it is discussing supplementary measures with related ministries. Deputy Commissioner Shin said in a media briefing that 'the Ministry of Economy and Finance, FSC, Financial Supervisory Service, and Bank of Korea are devising measures in the market situation monitoring meeting (F4 meeting), taking into account market impacts,' adding that 'we will be able to announce them at an appropriate time once they are finalized.'
FAQ
Q1: How much interest will investors receive on IPO subscription deposits under the new FSC system?
A1: Assuming a 1% annual interest rate on approximately ₩450 trillion in IPO subscription deposits locked for three days, investors could collectively receive over ₩30 billion annually after underwriters deduct subscription-related costs. The FSC stated this amount represents the remaining profits from underwriters' management of subscription deposits, which will be redistributed to individual investors.
Q2: When will South Korea's stock settlement cycle shorten from T+2 to T+1?
A2: The FSC plans to present a roadmap by October this year, with implementation scheduled for the second half of next year. Deputy Commissioner Shin Jin-chang specified that the actual settlement cycle shortening will occur as early as the second half of 2027, following careful preparation to eliminate settlement failure risks.
Q3: How much will margin loan rate reductions save investors annually?
A3: Based on an average margin loan balance of ₩1.7 trillion, reducing the current average annual rate from 9% to 8% — a 1 percentage point cut — would result in ₩17 billion in annual interest savings for investors. The FSC noted that the current 9% average rate is higher than in Japan and plans to review the appropriateness of the rate calculation system.
