Korea / Special Sits, Pairs, Index Rebalancing, Clepsydra Capital

Sanghyun Park

I investigate special situations, pairs, and index rebalancing trades in Korea.

Korea / Special Sits, Pairs, Index Rebalancing

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Clepsydra Capital

Investigate special situations, pairs, and index rebalancing trades in Korea.

Event-Driven

<p>The Korea FSC announced a new stock lending service specifically designed for local retail investors.</p><p>It is much broader in size and scope than the existing one.</p><p>The number of participating brokerages rises from 6 to 28. The lending pool totals ₩2.4T, a substantial increase from ₩0.02T.</p><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"Stock lending service"}'>Stock lending service</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Before"}'>Before</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"New"}'>New</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Number of participating brokerages"}'>Number of participating brokerages</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":6}'>6</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":28}'>28</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Lending size"}'>Lending size</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"₩20.5B"}'>₩20.5B</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"₩2,400.0B"}'>₩2,400.0B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Eligible stocks"}'>Eligible stocks</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":393}'>393</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Short 350"}'>
<p>Short 350 for now</p>
<p>(Most listed stocks later)</p>
</td>
</tr>
<tr><td colspan="3" rowspan="1" data-sheets-value='{"1":2,"2":"Source: KRX"}'>Source: KRX</td></tr>
</tbody>
</table><p>A total of 17 local brokerages begin to offer the new service right starting May 3. The other 11 brokerages will join within the end of this year.</p><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr><td colspan="3" rowspan="1" data-sheets-value='{"1":2,"2":"Participating brokerages"}'>Participating brokerages</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Before"}'>Before</td>
<td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"New"}'>New</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"NH"}'>NH</td>
<td colspan="1" rowspan="18" data-sheets-value='{"1":2,"2":"Starting May 3"}'><div><strong>Starting May 3</strong></div></td>
<td data-sheets-value='{"1":2,"2":"NH"}'><strong>NH</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Kiwoom"}'>Kiwoom</td>
<td data-sheets-value='{"1":2,"2":"Kiwoom"}'><strong>Kiwoom</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Shinhan"}'>Shinhan</td>
<td data-sheets-value='{"1":2,"2":"Shinhan"}'><strong>Shinhan</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Daishin"}'>Daishin</td>
<td data-sheets-value='{"1":2,"2":"Daishin"}'><strong>Daishin</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"SK"}'>SK</td>
<td data-sheets-value='{"1":2,"2":"SK"}'><strong>SK</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Yuanta"}'>Yuanta</td>
<td data-sheets-value='{"1":2,"2":"Yuanta"}'><strong>Yuanta</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"-"}'>-</td>
<td data-sheets-value='{"1":2,"2":"KIS"}'><strong>KIS</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"-"}'>-</td>
<td data-sheets-value='{"1":2,"2":"Hana"}'><strong>Hana</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"-"}'>-</td>
<td data-sheets-value='{"1":2,"2":"KB"}'><strong>KB</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"-"}'>-</td>
<td data-sheets-value='{"1":2,"2":"Samsung"}'><strong>Samsung</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"-"}'>-</td>
<td data-sheets-value='{"1":2,"2":"Kyobo"}'><strong>Kyobo</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"-"}'>-</td>
<td data-sheets-value='{"1":2,"2":"Mirae Asset"}'><strong>Mirae Asset</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"-"}'>-</td>
<td data-sheets-value='{"1":2,"2":"Cape"}'><strong>Cape</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"-"}'>-</td>
<td data-sheets-value='{"1":2,"2":"BNK"}'><strong>BNK</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"-"}'>-</td>
<td data-sheets-value='{"1":2,"2":"Sangsangin"}'><strong>Sangsangin</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"-"}'>-</td>
<td data-sheets-value='{"1":2,"2":"Hanyang"}'><strong>Hanyang</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"-"}'>-</td>
<td data-sheets-value='{"1":2,"2":"BNK"}'><strong>BNK</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"-"}'>-</td>
<td data-sheets-value='{"1":2,"2":"Bookook"}'><strong>Bookook</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"-"}'>-</td>
<td colspan="1" rowspan="11" data-sheets-value='{"1":2,"2":"By the end of the year"}'><div>By the end of the year</div></td>
<td data-sheets-value='{"1":2,"2":"eBest"}'>e-Best</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"-"}'>-</td>
<td data-sheets-value='{"1":2,"2":"Eugene"}'>Eugene</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"-"}'>-</td>
<td data-sheets-value='{"1":2,"2":"Hi"}'>Hi</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"-"}'>-</td>
<td data-sheets-value='{"1":2,"2":"Meritz"}'>Meritz</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"-"}'>-</td>
<td data-sheets-value='{"1":2,"2":"KTB"}'>KTB</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"-"}'>-</td>
<td data-sheets-value='{"1":2,"2":"IBK"}'>IBK</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"-"}'>-</td>
<td data-sheets-value='{"1":2,"2":"DB"}'>DB</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"-"}'>-</td>
<td data-sheets-value='{"1":2,"2":"Hanwha"}'>Hanwha</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"-"}'>-</td>
<td data-sheets-value='{"1":2,"2":"Hyundai Motor"}'>Hyundai Motor</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"-"}'>-</td>
<td data-sheets-value='{"1":2,"2":"Shinyoung"}'>Shinyoung</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"-"}'>-</td>
<td data-sheets-value='{"1":2,"2":"Yuhwa"}'>Yuhwa</td>
</tr>
<tr><td colspan="3" rowspan="1" data-sheets-value='{"1":2,"2":"Source: KRX"}'>Source: KRX</td></tr>
</tbody>
</table><p>The maximum lending period is 60 days. This is a guaranteed period. A borrower has up to 60 days of guaranteed period to keep the loaned stocks if they want.</p><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Conditions"}'>Conditions</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Max lending period"}'>Max lending period</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"60 days"}'>60 days</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Early repayment"}'>- Early repayment</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Only by borrowers"}'>Yes</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Lending fee"}'>Lending fee</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Set by brokerges"}'>Set by brokerages</td>
</tr>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Source: KRX"}'>Source: KRX</td></tr>
</tbody>
</table><p>Both borrowers and lenders can request early repayment.</p><p>But if a lender wants early repayment before the 60-day guaranteed period, the KSFC (Korea Securities Finance Corp) will repay out of the lending stock pool.</p><p><strong>The overall flow is quite simple. It is basically built around a stock loan structure with retail borrowers acting as a LP instead of a brokerage.</strong></p><p><strong>The KSFC serves as an intermediary operating a lending stock pool.</strong></p><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
<col width="100">
<col width="100">
<col width="100">
<col width="100">
<col width="100">
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr><td colspan="9" rowspan="1" data-sheets-value='{"1":2,"2":"Stock lending process"}'>Stock lending process</td></tr>
<tr>
<td colspan="1" rowspan="5" style="text-align: center;" data-sheets-value='{"1":2,"2":"Retail lender"}'><div><strong>Retail lender</strong></div></td>
<td colspan="1" rowspan="5" style="text-align: center;" data-sheets-value='{"1":2,"2":"←\nOffer stock loan\n\n→\nProvide stocks as collateral"}'><div>←<br>Offer stock loan<br><br>→<br>Provide stocks as collateral</div></td>
<td colspan="1" rowspan="5" style="text-align: center;" data-sheets-value='{"1":2,"2":"Brokerage A"}'><div>Brokerage A</div></td>
<td colspan="1" rowspan="5" style="text-align: center;" data-sheets-value='{"1":2,"2":"←\nOffer stock loan\n\n→\nProvide stocks as collateral"}'><div>←<br>Offer stock loan<br><br>→<br>Provide stocks as collateral</div></td>
<td colspan="1" rowspan="5" style="text-align: center;" data-sheets-value='{"1":2,"2":"KSFC\n(Lending stock pool)"}'><div>
<strong>The KSFC</strong><br><strong>(Lending stock pool)</strong>
</div></td>
<td colspan="1" rowspan="5" style="text-align: center;" data-sheets-value='{"1":2,"2":"←\nGive cash as collateral\n\n→\nLend stocks"}'><div>←<br>Give cash as collateral<br><br>→<br>Lend stocks</div></td>
<td colspan="1" rowspan="5" style="text-align: center;" data-sheets-value='{"1":2,"2":"Brokerage B"}'><div>Brokerage B</div></td>
<td colspan="1" rowspan="5" style="text-align: center;" data-sheets-value='{"1":2,"2":"←\nGive cash as collateral\n\n→\nLend stocks"}'><div>←<br>Give cash as collateral<br><br>→<br>Lend stocks</div></td>
<td colspan="1" rowspan="5" style="text-align: center;" data-sheets-value='{"1":2,"2":"Retail borrower"}'><div><strong>Retail borrower</strong></div></td>
</tr>
<tr></tr>
<tr></tr>
<tr></tr>
<tr></tr>
<tr><td colspan="9" rowspan="1" data-sheets-value='{"1":2,"2":"Source: KRX"}'>Source: KRX</td></tr>
</tbody>
</table>

The Korea FSC announced a new stock lending service specifically designed for local retail investors.It is much broader in size and scope than the existing one.The number of participating brokerages rises from 6 to 28. The lending pool totals ₩2.4T, a substantial increase from ₩0.02T.







Stock lending service
Before
New


Number of participating brokerages
6
28


Lending size
₩20.5B
₩2,400.0B


Eligible stocks
393

Short 350 for now
(Most listed stocks later)


Source: KRX

A total of 17 local brokerages begin to offer the new service right starting May 3. The other 11 brokerages will join within the end of this year.






Participating brokerages

Before
New


NH
Starting May 3
NH


Kiwoom
Kiwoom


Shinhan
Shinhan


Daishin
Daishin


SK
SK


Yuanta
Yuanta


-
KIS


-
Hana


-
KB


-
Samsung


-
Kyobo


-
Mirae Asset


-
Cape


-
BNK


-
Sangsangin


-
Hanyang


-
BNK


-
Bookook


-
By the end of the year
e-Best


-
Eugene


-
Hi


-
Meritz


-
KTB


-
IBK


-
DB


-
Hanwha


-
Hyundai Motor


-
Shinyoung


-
Yuhwa

Source: KRX

The maximum lending period is 60 days. This is a guaranteed period. A borrower has up to 60 days of guaranteed period to keep the loaned stocks if they want.





Conditions

Max lending period
60 days


- Early repayment
Yes


Lending fee
Set by brokerages

Source: KRX

Both borrowers and lenders can request early repayment.But if a lender wants early repayment before the 60-day guaranteed period, the KSFC (Korea Securities Finance Corp) will repay out of the lending stock pool.The overall flow is quite simple. It is basically built around a stock loan structure with retail borrowers acting as a LP instead of a brokerage.The KSFC serves as an intermediary operating a lending stock pool.












Stock lending process

Retail lender
← Offer stock loan  → Provide stocks as collateral
Brokerage A
← Offer stock loan  → Provide stocks as collateral

The KSFC (Lending stock pool)

← Give cash as collateral  → Lend stocks
Brokerage B
← Give cash as collateral  → Lend stocks
Retail borrower





Source: KRX



Korea's New Retail Stock Lending Service: Flow Structure & Potential Impacts

HLB Inc

Korea's New Retail Stock Lending Service: Flow Structure & Potential Impacts