(1) Reasons for Proposal

The G20 Summit agreed to introduce a trade repository system to report and manage OTC derivatives trading information as the need to manage the over-the-counter (OTC) derivatives market, where risk management is difficult, which emerged after the global financial crisis in 2008. Accordingly, this amendment aims to improve and supplement some of the shortcomings in the operation of the current system, such as providing the basis for sanctions for violations of reporting the subject, object, method, and reporting obligations and establishing the guarantee deposit exchange system to ensure the safety of trades in uncleared OTC derivatives.

(2) Major Provisions

A. Impose an obligation to report trading information such as OTC derivatives (Article 166-4 newly inserted) 

Impose an obligation to report trading information to a trade repository, such as information about the trading partners, detailed contract terms, and valuation methods when any financial investment business entity trades OTC derivatives, etc., and allow the reporting to be entrusted to others

B. Impose an obligation to exchange guarantee deposits for OTC derivatives trades (Article 166-5 newly inserted) 

When OTC derivatives are traded by any financial institution with more than a certain amount of OTC derivatives trading balances, request to exchange guarantee deposits between the parties to ensure the stability of the trade

C. Provide the basis for authorizing the trade repository business (Article 323-21 through Article 323-23, newly inserted) 

Require the approval of the Financial Services Commission if a person intends to run a trade repository business, and stipulate the requirements that shall be met when requesting the approval, including a certain amount of equity capital, qualifications of executives and major shareholders, and matters related to the application and examination of the approval

D. Establish qualifications and internal control standards for executives in a trade repository (Article 323-25 newly inserted) 

Stipulate the qualifications of executives in a trade repository and mandate the establishment of internal control standards, including standards and procedures that must be followed by employees to manage risks, conflicts of interest, etc., in relation to the operation of the trade repository

E. The scope of concurrently run business and incidental business of a trade repository (Article 323-26 newly inserted) 

Establish the scope of the concurrently run business and incidental business: for example, defining the business that this Act and Presidential Decree prescribe as the trade repository business as the concurrently run business and defining the business that checks detailed trading details between trading partners of OTC derivatives as incidental business

F. Business regulations of trade repositories (Article 323-27 newly inserted) 

Require any trade repository to establish business regulations that contain details such as the matters on trades and financial investment instruments and the management of trading information and to receive the approval of the Financial Services Commission when enacting or changing them

G. Obligations to provide, disclose and reserve trading information in trade repositories (Article 323-28 newly inserted) 

Require trade repositories to provide the reported trading information to the Financial Services Commission, etc., periodically disclose statistical information related to trading information on the Internet website, etc., and reserve trading information for a certain period

H. Basis and criteria for measures related to operations such as revocation of the approval and business suspension of a trade repository (Article 323-31 and attached Table 8-3, newly inserted) 

Establish the basis and criteria for measures that the Financial Services Commission may take in relation to operations, such as revoking an approval, suspending business operations, or a corrective order for illegal activities against a trade repository that has received the approval in a false or illegal way or requests for dismissal and suspension of duties for executives of a trade repository that has committed illegal acts

I. Abolish the limit on the issuance of corporate bonds of a securities finance company (Article 329 (1) and (2), deleted) 

Abolish the limit on the issuance of corporate bonds of a securities and finance company, which was previously up to 20 times the aggregate amount of its capital and reserve in line with the amendments to the Commercial Act, which has abolished the limit on the issuance of corporate bonds

* <Note> The above is a ‘bill to be processed again by the 21st National Assembly' and the same as the 'Bill Acceptance No. 2019-3545 (Bill Examination No. 2019-517).’