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The Korea Stock Exchange is the premier place for trading stocks and bonds in South Korea. Its interesting history begins with the unification of several smaller exchanges in the 1950s and evolves into the state-of-the-art trade center it has become. Throughout its time, the Exchange has held four principles as its guiding light for ensuring a fair market system: a focus on profitable, stable companies; encouraging full corporate disclosure; a dedication to market transparency; and strong efforts in fraud prevention.
Compared to many markets around the world, the Korea Stock Exchange, based in the city of Busan, is fairly young. In 1953, three Korean spot and futures exchange markets—Korea Stock Exchange, Korea Futures Exchange, and KOSDAQ—combined under the direction of the Korean Stock and Futures Exchange Act. The result was a single, unified place for trading national and international interests. From these humble beginnings, the Exchange has grown to include over 1,500 companies worth over a trillion US dollars.
In order to reach this financial level, the Korea Stock Exchange has changed to keep up with technology. In 1975, the stock market began using "open outcry" trading, which is basically an enormous verbal auction. This method worked well, but was often chaotic, so in 1988 the Exchange instituted a computerized trading system to run in conjunction with this system. When the technology was advanced enough, the Exchange did away with both in favor of a fully automated system in 1997. This system is much like the kind used in North American and European exchanges.
Another advancement that helped the Korea Stock Exchange grow into a powerful modern market was lifting the ceiling on investment for foreign investors. This occurred in 1992, and allowed non-Korean investors to purchase as much stock in Korean companies as desired. This bolstered the economy and created a boom of bond purchasing.
Throughout its rapid growth, the Korea Stock Exchange has listed four guiding principles to maintain fairness and open market sensibility. To help prevent fraud, the Exchange investigates any suggestion of unfair cyber trading. It also works to maintain a transparent market, using market surveillance to keep an eye on trading activities and stock prices. An emphasis on stable, profitable companies with good potential for growth also helps the Exchange stay strong. It also encourages corporate disclosure, so that investors can make informed decisions.
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