Securities
Overview
Securities (유가증권, Securities) are certificates representing rights with property value, requiring possession of the certificate for the exercise or transfer of the right. Representative examples include stocks, bonds, checks, and bills, functioning as key instruments for fundraising and investment in the capital market. Securities are classified by issuer into government bonds, corporate bonds, stocks, etc., and are traded in the secondary market to facilitate capital movement among economic agents.
Main Content
Legal Definition and Types of Securities
Securities are broadly classified into order securities, registered securities, and bearer securities. Order securities are transferable by endorsement (bills, checks), registered securities specify a particular person as the rights holder (stock certificates, bonds), and bearer securities consider the holder of the certificate as the rights holder (bearer bonds). In practice, stocks, bonds, and derivative securities are the main trading objects.
Functions of Securities
1. Fundraising Function: Companies and governments raise funds from investors by issuing securities. Stock issuance corresponds to equity capital expansion, while bond issuance corresponds to debt financing.
2. Investment Tool: Individual and institutional investors earn returns (dividends, interest, capital gains) through securities trading.
3. Liquidity Provision: Real-time trading on the securities market (stock exchange) enhances asset liquidity.
4. Risk Diversification: Diversified investment across various securities can mitigate risks of specific companies or industries.
Issuance and Distribution of Securities
- Primary Market (1st Market): The market where securities are first issued through initial public offerings (IPOs) or rights offerings. Investment banks (IBs) act as underwriters and arrangers.
- Secondary Market (2nd Market): The market where already issued securities are traded among investors, represented by the Korea Exchange (KRX)'s securities market (KOSPI) and KOSDAQ market. Over-the-counter trading also occurs on the K-OTC market.
Valuation and Price Determination of Securities
The price of securities is divided into intrinsic value and market price. The intrinsic value of stocks is assessed by discounting the company's future cash flows (Discounted Cash Flow method, DCF), while bonds are determined by face value, coupon rate, time to maturity, and market interest rates. Market prices are influenced by supply and demand, economic indicators, corporate performance, policy changes, etc.
Regulations Related to Securities
In South Korea, the Capital Market and Financial Investment Business Act (Capital Market Act) governs the issuance, disclosure, and trading of securities. The Financial Services Commission and the Financial Supervisory Service oversee compliance, and listed companies must disclose quarterly, semi-annual, and annual reports. Unfair trading practices such as insider trading and market manipulation are strictly prohibited.
Latest Trends
The securities market in 2024–2025 is undergoing the following changes:
- Rise of Security Token Offerings (STOs): Security Token Offerings, which issue traditional securities as blockchain-based tokens, are gaining attention. In South Korea, related legal frameworks have been refined since 2024, and STO issuances based on real assets such as real estate and art are being attempted.
- Expansion of ESG Bonds: Issuance of green bonds, social bonds, and sustainability bonds considering environmental, social, and governance (ESG) factors has surged. In 2024, the domestic issuance volume of ESG bonds increased by 30% year-on-year.
- Increased Direct Participation by Individual Investors: Individual investors' securities trading has become more active through online brokerage platforms (e.g., Toss Securities, Kiwoom Securities). By 2025, fractional stock trading and robo-advisor-based automated investing are becoming common.
- Digital Bond Issuance: The Bank of Korea and the Financial Services Commission are conducting a pilot project for digital bonds (blockchain-based bonds), targeting commercialization in the second half of 2025.
- Interest Rate Cut Cycle and Bond Market: Expectations of interest rate cuts by the U.S. Federal Reserve and the Bank of Korea have increased demand for long-term bonds, making duration strategies important.
Related Topics
- [[Stock]]
- [[Bond]]
- [[Capital Market Act]]
- [[Korea Exchange]]
- [[Security Token Offering]]
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