알고리즑거래 위험관리 가이드라인 — English Edition
The English edition of the Korea Exchange's Guidelines on Risk Management for Algorithmic Trading, issued by the KRX Market Oversight Commission. This is the operating manual for algo-trading controls at a Korean member firm: what must be in place before an algorithm reaches the market, what limits must sit in front of every order, who must be told when a limit breaks, and how the member must keep direct control of its Front-End Processor (FEP). Written after a Task Force review of real domestic order incidents — most of which, the Guidelines note, would not have happened had internal controls been thorough. Not available in English elsewhere.
| Control | Requirement |
|---|---|
| Order limits | Amount-based and quantity-based, set in advance; automatic rejection on breach |
| Breach records | Retained 10 years |
| Security device logs | Retained at least 1 year |
| System review records | Retained 5 years |
| FEP confirmation statement | Annual; retained 3 years |
| Incident-response training | At least once a year |
A complete English translation of the Korean source as issued in November 2014, including all 42 footnotes — which quote in full the underlying provisions of the Securities, KOSDAQ, KONEX and Derivatives Market Business Regulations, the Standards for Access to Member Systems, etc., and the Financial Investment Services and Capital Markets Act.
The Guidelines are recommendatory and not binding rules; statutory and regulatory references are stated as at the date of the source document. Article numbers, appended tables and the checklist structure are reproduced exactly as in the Korean original.
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Prepared by H&S Partners, a licensed Korean law office.
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Trading in which investment decisions and the generation and submission of quotations are carried out by an automated system, without human intervention, in accordance with predetermined rules. The definition entered the Derivatives Market Business Regulation by the amendment of 3 July 2013 (Article 156-3).
KRX members engaging in proprietary or brokerage trading using algorithms. Some sections apply only to proprietary trading and others only to brokerage trading — the document states exactly which, and the checklist columns follow the same split. Members may also recommend voluntary application to institutional and other investors.
Order limits by amount and by quantity, set in advance and enforced by automatic rejection; periodic review of those limits against creditworthiness; quotation validity checks before submission; cumulative quotation quantity and risk exposure limit checks; a one-click cancellation function for customer requests; familiarity with the Exchange's kill switch procedure; real-time monitoring with alerts; and access control for the member system.
Because letting a customer manage or operate the member's Front-End Processor — or giving one customer preferential facilities, such as bypassing the security device or hosting their order program on the member's FEP — defeats quotation validity and margin checks, is unfair on speed grounds, and is prohibited. Chapter 6 sets out what direct control actually means in practice.
No. They recommend to members the implementation of matters necessary for the stable operation of the market. The statutes, the Exchange's business regulations and their enforcement rules govern in all cases.
It is a complete, faithful English translation of the Korean text, prepared by H&S Partners, with all tables, checklist rows, article references and all 42 footnotes reproduced. In case of any discrepancy, the Korean original prevails.
Advisory
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