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/Yonhap

Amid mounting concerns over investor losses in contracts for difference (CFD) due to drops in the share prices of Samsung Electronics and SK Hynix, bank-affiliated securities firms are focusing on minimizing their risk exposure. Five financial holding company-affiliated brokerages—KB, Shinhan, NH, Hana, and iM—accounted for only about 0.2% of the total CFD long balance for the two stocks as of the end of July. These firms are taking a cautious approach toward expanding CFD operations, tightening onboarding criteria by measures such as restricting non-face-to-face account openings.

According to the office of Representative Choi Eun-seok of the People Power Party on the National Assembly National Policy Committee on the 15th, the CFD long balance in Samsung Electronics and SK Hynix across 12 securities firms handling CFD (NH, Samsung, Meritz, KB, Hana, Kiwoom, Yuanta, Shinhan, Kyobo, DB, iM, and Eugene) plunged 45.3% from 709.14 billion won at the end of June to 388.16 billion won at the end of July. The monthly buy transaction volume in July also contracted 45.6% to 167.83 billion won from 308.23 billion won in the previous month. Both the long balance and the monthly buy trading volume shrank. This appears to stem from CFD liquidations and forced sales occurring as the stock market—including Samsung Electronics and SK Hynix—tumbled entering July, or from an overall decrease in CFD trading itself.

The two stocks' CFD long balance held by the five financial holding-affiliated brokerages rose from 910 million won at the end of June to 1.45 billion won at the end of July, but their share of the overall long balance remained negligible.

CFDs are over-the-counter derivative instruments where investors settle the price difference resulting from movements in underlying assets without directly owning them. With margin requirements set between 40% and 100%, investors can take leveraged positions of up to 2.5 times their margin. However, losses can mount rapidly if the price of an underlying asset moves against expectations, and investors face the risk of forced liquidation if their margin falls below maintenance levels.

The increase in open interest shares also warrants attention. The total open interest in CFD shares for Samsung Electronics and SK Hynix—combining long and short positions—jumped 57.1% in a single month from 831,352 shares at the end of June to 1,306,444 shares at the end of July. While the monetary value of the long balance decreased, the number of open interest shares increased. Although a drop in valuation stemming from falling share prices may have played a role, it is difficult to definitively determine whether positions were voluntarily closed or forcefully liquidated based solely on changes in balance figures. In particular, if long positions account for a large portion, falling stock prices could heighten paper losses and the burden of margin calls.

Stock prices of the two tech giants continued to slide after late June. The closing price of Samsung Electronics fell 21.4% from 334,000 won at the end of June to 262,500 won at the end of July, before closing at 210,000 won on this day, retreating an additional 20% compared to the end of July. SK Hynix likewise tumbled 35.2% from 2.65 million won at the end of June to 1,718,000 won at the end of July, and finished at 1,262,000 won on this day, sliding a further 26.5% from the end of July. The continuous declines in both stocks are factors that can escalate investor losses and margin pressures for those holding long positions.

Bank-affiliated securities firms maintain that they place greater weight on risk management than on aggressive sales of CFD products. An official at NH Investment & Securities said, "For risk management purposes, we tightened service eligibility rules by prohibiting non-face-to-face account openings, and we are also refraining from actively pushing related businesses." An official at KB Securities also commented, "Our clients do not favor CFD products, nor do we actively recommend them."

Conversely, the remaining brokerages—including Kyobo, Eugene, Meritz, Kiwoom, Yuanta, and DB Financial Investment—accounted for the vast majority of CFD long balances in Samsung Electronics and SK Hynix. With the share of bank-affiliated firms remaining marginal, CFD balances appeared heavily concentrated in select brokerages.

Representative Choi said, "With CFD using leverage amid heightened market volatility, investor losses can amplify, making risk management and investor protection vital." He added, "It is necessary to closely examine the current state of CFD trading and the reality of risk management practices."

                                                                                                                 Lee Bo-ra