Six-month ban imposed for causing market crash ends in October


Deutsche Securities Korea is to resume derivatives trading from October when a six-month ban imposed by the local regulator expires, sources said.

Speaking on behalf of Deutsche Securities Korea, Michael West, head of PR for the company’s Asia-Pacific, said the company “remains fully committed to Korea.”

He however declined to comment on whether derivative trading will be resumed in early October.

According to the Financial Services Commission and the Financial Supervisory Service, which imposed their heaviest-ever penalty on DSK for triggering a stock market rout on Nov. 11 last year, “DSK is free to resume trading without consent from regulators on Oct. 1 (or Oct. 4 based on trading sessions).” 

A regulatory official, who investigated the case, downplayed the possibility that the brokerage house will delay or scrap its business resumption. 

“There is no reason for it not to resume its operation immediately, they’re in such a competitive market,” he said. 

Meanwhile, some speculates that DSK, in alleged staff shortage, will struggle for the next few months, which may be linked to postponement in the scheduled resumption of derivative trading.

DSK has been short of eight staff members, who had quit for Barclays Capital, since June. Barclays on Wednesday said it has hired nine staff members for its Seoul equities team, of which eight are from Deutsche.

Asked about Korean regulators' sanction, Deutsche official West still denied of wrongdoing related to the Nov. 11 crash.

“DSK did not authorize or condone any breach of market regulations and this matter will be vigorously defended,” he said, reiterating his earlier statement from August.

The FSC/FSS and prosecutors had judged that traders in the company’s Hong Kong and Seoul branch conspired to manipulate the market by gathering massive amounts of stock options over a period of a week and ‘program’ sold them all at once at the last trading minutes of Nov. 11. The alleged act of manipulation allowed them to reap almost 44.8 billion won and caused the KOSPI to plunge 2.7 percent.

Four employees from the company’s Hong Kong and Seoul office were indicted in August on charges of gaining unlawful profits by manipulating stock prices. Three of them are from the Hong Kong branch, including one executive, and one other is an executive at DSK.

“DSK denies the charges,” parent Deutsche Bank said in a statement following the indictment.

“It’s regrettable that the Seoul Central District Prosecutors’ Office has decided to charge its local Korean brokerage unit, Deutsche Securities Korea.”

The foreign securities firm has been suffering the suspension since April 1 under regulatory sanction, which was handed down in late February.

By Cynthia J. Kim (cynthiak@heraldcorp.com)