Will Fractional Share Trading Gain Momentum?

Non-public Meeting Held with Participation from Financial Services Commission and Others

[Asia Economy Reporter Junho Hwang] A confidential meeting regarding the introduction of fractional share trading, which allows stocks to be divided and sold in units smaller than one share, will be held. Nearly a year after the Financial Services Commission announced plans to permit fractional trading for domestic stocks, no significant progress has been made, and attention is focused on whether this meeting can open a new path forward.

According to the financial investment industry on the 4th, a confidential meeting on the introduction of fractional trading will take place on the 5th at an undisclosed location in Seoul, attended by the Financial Services Commission, law firms, and capital market experts. Securities company officials related to the introduction of fractional trading will not participate in this meeting. An anonymous source stated, "We have already sufficiently heard the industry's opinions on the introduction of fractional trading, so this meeting is understood to be arranged to discuss practical matters related to the system's implementation."

The fractional trading system changes the standard for stock trading to fractional units, allowing small investments in blue-chip stocks or diversified investments. To introduce this system, there is a need to resolve the issue that domestic stocks are not protected under related laws such as the Commercial Act, which defines stocks in units of one share. Institutional improvements related to voting rights, which are exercised in one-share units, are also necessary. Due to these issues, the Financial Services Commission announced regulatory reform plans last August to allow fractional trading for domestic stocks but has yet to provide a definitive answer after more than a year.

The industry expects that the Financial Services Commission’s movements, including participation in related meetings, could advance the situation. Recently, the Financial Services Commission extended the temporary allowance of fractional trading for overseas stocks at some securities firms. In 2019, through the Innovative Financial Services Sandbox, fractional trading services for overseas stocks were permitted only to Shinhan Financial Investment and Korea Investment & Securities. Last month, on the 23rd, as the permission period for Shinhan Financial Investment expired, the service was extended for another two years.

Regarding this, the Financial Services Commission responded, "We plan to attend the meeting to listen to and refer to various opinions related to fractional trading."