S.Korea considers putting exchange operator under state control

Published: 11 Dec 2008 02:03:29 PST

SEOUL, Dec 11 - South Korea's finance ministry will likely decide next month whether to put bourse operator Korea Exchange (KRX) under state control, as recommended by the national audit agency, a ministry official said on Thursday.

The Board of Audit and Inspection in September put forward the proposal in September, arguing that KRX needed to be more closely supervised and made more efficient.

"We have been examining this since early December. Nothing has materialised by now," the official said, adding that a decision would be announced at the end of January.

She asked not to be identified because the discussions were still going on.

The discussion is part of a wider annual review of what the government classifies as public institutions but in which it does not necessarily own any stake. There are 305 such entities, including the National Health Insurance and the Korea Teachers Pension.

The audit agency said KRX, which is owned by brokerage and futures companies, should be included in the list because of its monopoly position. South Korea privatised the exchange in 1988.

It has tried to go public since 2003, but has been stuck in debate over how to reform the bourse operator and how to use the proceeds from any sale.

One KRX official, who asked not to be named, said he expected the Finance Ministry to accept the audit agency's argument though he said it would be contrary to global practice.

"I cannot think of a single stock exchange in developed markets that is owned by the government," he said.

Commission fees from securities companies accounted for 70.5 percent of KRX income.

KRX, the world's No.3 derivatives exchange, is the single bourse operator in South Korea after it absorbed the Korea Futures Exchanges and the junior Kosdaq markets.