(LEAD) Korea Exchange sets up plan for shorter settlement for stock trading

Seoul, November 2 -- The Korea Exchange (KRX) has announced plans to reduce the period for stock settlement, a significant change that could enhance the efficiency of the equity market. Currently, investors must wait two business days after making a trade to settle their transactions. The KRX proposes a modification that would allow this process to be completed in just one business day, as stated in a recent declaration.

The necessary infrastructure for this reform is scheduled to be completed by October 2027, according to the KRX. The main objective of this plan is to shorten the settlement cycle by a single day, thereby minimizing settlement risks in the securities market. This modification would enable investors who have sold stocks to receive their proceeds the following day, while also easing the workload and promoting automation and standardization within the industry, as per the KRX.

Once the infrastructure is in place, approximately six months of testing for the new settlement system will be necessary. However, the exact implementation date remains uncertain; if all goes well, the shorter settlement system might come into effect by 2028. To facilitate this proposed overhaul, the KRX intends to engage in discussions with financial authorities, local and foreign financial institutions, and overseas investors.