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Photo = Kiwoom Securities |
[Alpha Biz= Paul Lee] Kiwoom Securities is facing a backlash over allegations of inflating overseas stock trading volume and market share. This comes as the company lost its top spot in overseas stock market share to its competitor, Toss Securities, further damaging its reputation. Following a series of system outages earlier this month, which eroded consumer trust, Kiwoom Securities is now under pressure to find a way to recover.
According to financial industry sources on the 2nd, Kiwoom Securities introduced a reward event called "Hero Membership" in January. The program offers customers cash rewards ranging from 10,000 KRW to 500,000 KRW based on their overseas stock trading volume.
After the introduction of the membership program, Kiwoom Securities became embroiled in controversy for allegedly enabling "cherry-picking" customers—individuals who engaged in self-dealing and inflated trading volumes to earn rewards. These cherry-pickers primarily targeted short-term U.S. Treasury bond exchange-traded funds (ETFs), repeatedly buying and selling them to inflate their trading volumes and collect cash rewards.
Following the launch of the membership program, ETFs such as 'iShares Short Treasury Bond,' 'SPDR Bloomberg 1-3 Month T-Bill,' and 'iShares 0-3 Month Treasury Bond,' which all track U.S. short-term Treasury bonds, became some of the most traded securities on Kiwoom’s mobile trading system (MTS). These ETFs, known for their low price volatility and narrow bid-ask spreads, were favored by cherry-pickers who could earn rewards with minimal risk. In response to similar issues, KB Securities blocked online purchases of these ETFs in September last year.
Critics argue that instead of implementing systems to control such behavior, Kiwoom Securities may have inadvertently encouraged it by expanding the reward program. The significant increase in market share for overseas stocks after the introduction of the reward program has only fueled suspicions about the legitimacy of the trading volume.
Alphabiz Reporter Paul Lee(hoondork1977@alphabiz.co.kr)
