The U.S. Commodity Futures Trading Commission is likely to take disciplinary action against Korea Exchange Inc. for violating rules that require qualified central counterparty clearinghouses to conduct daily stress tests and maintain clearinghouse liquidity against financial defaults, The Chosun Ilbo reported, without citing sources.
The U.S. regulator granted a central counterparty certification to Korea Exchange in 2014, allowing it to clear investors' transactions. The volume of interest rate swaps cleared through the South Korean stock exchange amounted to 611 trillion won in 2017 alone, according to the report.
Korea Exchange had conducted stress tests on a monthly basis, and its daily clearinghouse liquidity fell short of the level required by the CFTC. The U.S. regulator sent an email notice to Korea Exchange about the rule violations in July. It is expected to notify Korea Exchange of its disciplinary action as early as December.
Meanwhile, the European Securities and Markets Authority is also likely to similarly review the qualified central counterparty status of Korea Exchange. The European regulator had granted the qualified central counterparty status to Korea Exchange in 2016.
As of Dec. 18, US$1 was equivalent to 1,128.41 South Korean won.