Study on Demutualization of Stock Exchanges by alicejenny

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									  A Study on Demutualization of Stock Exchanges
          - Focusing on the Case of Korea Exchange -




                                                                    Jung, Nu Ri
                                                    (이화여자대학교 국제학부 교수)




【 ABSTRACT】

Demutualization generally refers to the process of reorganizing a mutualized, or
member-owned, entity into a for-profit corporation with shareholders, and
demutualization of stock exchanges means a process of converting exchanges
from non-profit, member-owned organizations to for-profit, investor-owned stock
corporations. The process of demutualization proceeds in several steps. Exchange
demutualization commences when the membership of a traditional non-profit
organization that operates a stock exchange reorganizes the exchange as a for-
profit institution, and concludes when the exchange goes public and thus become
listed.

Nowadays demutualization of stock exchanges is no longer unusual. Many stock
exchanges around the world have already demutualized in order to achieve
economies of scale as a response to increased competition. In response to such
phenomenon, the Korea Exchange (KRX) announced its self-listing plan in the
 end of February 2011, purporting to make it easier to participate in the ongoing
 consolidation of global stock exchanges. KRX takes form of a stock company,
 but has not gone public yet. Thus being a listed exchange means the
 completion of demutualization to KRX. The exchange began to push for its



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self-listing from 2003, but the current situation around KRX is somewhat
different from before, because since January 29, 2009 the exchange has been
designated a public institution.

The primary purpose of this paper is to study demutualization of KRX and
related legal issues. Before examining the case of KRX, the paper first provides
overview of exchange demutualization and discusses its implications.

Key Words: Stock exchange / Self-regulatory organization / Public institution / Demutualization
           / Going public / Self-listing / Conflicts of interest / Shareholding restrictions /
           M&A threats

논문투고일: 2011. 10. 27 / 논문심사일: 2011. 11. 16 / 게재확정일: 2011. 12. 5
                     정누리 / A Study on Demutualization of Stock Exchanges                      301



【Table of Contents】

 Ⅰ . Introduction                                        2. Issues Involved in Demutualization of
 Ⅱ . Demutualization of Stock Exchanges                     the Korea Exchange
     1. Overview of Exchange Demutualization                (1) Overview
     2. Implications of Exchange Demutuali-                 (2) Conflicts of Interest
         zation                                             (3) Shareholding Restrictions and
 Ⅲ . Demutualization of the Korea Exchange                      M&A Threats
     1. Structure of the Korea Exchange              Ⅳ . Conclusion




                                     Ⅰ . Introduction

     The Korea Exchange (KRX), the sole financial exchange in Korea, announced
its self-listing plan in the end of February 2011. If the plan really works, then
this means that demutualization of KRX is finally completed.
     What is demutualization? Demutualization is the process of reorganizing a
mutualized, or member-owned, entity into a for-profit corporation with share-
holders.1) Sometimes the press refers to such transactions as “stockings” in
reference to the process of granting stock to policyholders or, more generally, as
“privatization.”2)
     In regard to stock exchanges, demutualization means a process of converting
exchanges from non-profit, member-owned organizations to for-profit, investor-
owned stock corporations3) with a further step of becoming publicly traded
companies.4) Organized securities and futures exchanges where traditionally
operated as non-profit membership organizations, but advances in technology,

 1) Jake Keaveny, In Defense of Market Self-Regulation: An Analysis of the History of Futures
    Regulation and the Trend Toward Demutualization, 70 BROOK. L. REV. 1419, 1422 n.16(2005).
 2) David A. Furlow & Matthew R. Reed, Demutualization Litigation and ERISA: A Nationwide
    Survey of Lawsuits and Settlements, 831 PLI/LIT 81, 89(2010).
 3) Keaveny, supra note 1, at 1438.
 4) Reena Aggarwal, Demutualization and Corporate Governance of Stock Exchanges, 15 (1) J. APPLIED
    CORP. FIN. 105, 105(2002), available at http://www.set.or.th/setresearch/files/demutualization/
    ResearchPaperˍ2002ˍReena.pdf.
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increased competition and other market forces have led numerous exchanges to
demutualize.5) Today the demutualization of securities and futures exchanges is
no longer unusual. The world’s major stock markets are now largely for-profit
enterprises.6) Thus, on balance, the trend is clearly toward demutualization.7)
      However, as discussed later, the process of demutualization takes place in
stages and can ultimately take several different forms.8) Some exchanges have
gone all the way through, while others have stopped in the middle of the
process. KRX has been the one of the latter case. KRX once attempted to fully
demutualize itself, but did not succeed at that time. This time the result may be
same as before, because any further progress has not been known yet besides
the aforementioned announcement regarding KRX’s self-listing plan in February
2011. However, even so, that would not be the end of the story. Someday,
sooner or later, the same issue will be taken up for discussion again, as more
and more stock exchanges are becoming demutualized.
      The primary purpose of this paper is to study demutualization of KRX and
related legal issues. The paper first discusses demutualization of stock exchanges
in overall and then examines demutualization of KRX.




                 Ⅱ . Demutualization of Stock Exchanges

1. Overview of Exchange Demutualization

      Traditionally a stock exchange has been organized as a form of mutual,
not-for-profit association, founded and owned by their members,9) brokers and


5)   Keaveny, supra note 1, at 1422 n.16.
6)   Steven M. Davidoff, Regulating Listing in a Global Market, 86 N.C. L. REV. 89, 127(2007).
7)   Ibid., at 127 n.184.
8)   Aggarwal, supra note 4, at 107.
9)   Anastassia Chtaneva, Alternative Trading Systems: Impact of Technology on Securities Market
     Structure, 17 B.F.L.R. 341, 357(2002).
                      정누리 / A Study on Demutualization of Stock Exchanges                        303


dealers who managed their stock exchange like an exclusive club, with high
barriers for new entrants and a regional or even national monopoly, comparable
to a medieval gild.10) However, today, domestic and international competition
increasingly compels stock exchanges to give up their exclusivity, undergo
restructuring, and become publicly traded for-profit companies - a process
referred to as demutualization.11)
     Demutualization, in the strictest sense, refers to the change in legal status of
the exchange from a mutual association with one vote per member and possibly
consensus-based decision making, into a company limited by shares, with one vote
per share with majority-based decision making.12) The timing of demutualization
is largely seen as being brought about by new competition from electronic
communications networks (ECNs),13) but also by an increase in trading volume
internationally, the integration of capital markets globally, and decimalization.14)
     As stated earlier, the process of demutualization has several steps and can
have several different shapes. In the first phase, members of an exchange are
typically given shares in and so become legal owners of the organization.15)
Then, or in some cases even as part of phase one, the organization raises capital


10) Andreas M. Fleckner, Stock Exchanges at the Crossroads, 74 FORDHAM L. REV. 2541, 2541-42
    (2006).
11) Ibid., at 2542.
12) Shamshad Akhtar, Demutualization of Asian Stock Exchanges - Critical Issues and Challenges, in
    DEMUTUALIZATION OF STOCK EXCHANGES: PROBLEMS, SOLUTIONS AND CASE STUDIES 3,
    3-4(Shamshad Akhtar ed., 2002), available at http://www.adb.org/documents/books/demutualization
    ˍstockˍexchanges/demutualization.pdf.
13) Electronic communications networks, or ECNs, are electronic trading platforms that allow buyers
    and sellers to match orders directly without routing the order to a broker-dealer or specialist.
    See Stephen F. Diamond & Jennifer W. Kuan, Ringing the Bell on the NYSE: Might a Nonprofit
    Stock Exchange Have Been Efficient?, 9 DUQ. BUS. L.J. 1, 4 n.16(2007).
14) Ibid., Decimalization refers to the transition from quoting stock prices in 1/16ths or 1/8ths of a
    dollar to quoting in pennies, or decimals. The transition to decimal pricing in the United States
    occurred in 2000. See Daniel N. Budofsky, Current Market Structure Issues in the U.S. Equity
    and Options Markets, 1835 PLI/CORP 285, 329(2010). Options markets, however, unlike equities
    markets, did not move to trading in pennies during the switch to decimalization. Instead, options
    priced at or above $3.00 traded in $0.10 quote increments, and options priced under $3.00
    traded in $0.05 quote increments. See Ibid., at 315-16.
15) Aggarwal, supra note 4, at 107.
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through a private placement,16) typically from outside investors as well as
members.17) The demutualized exchange as a privately owned company then
has two basic options: the exchange can either (1) stay put as a private
company; or (2) list itself by going public and eventually removing all restrictions
on trading18) so as to become a listed company. In other words, self-listing or
conducting an initial public offering (IPO) is the ultimate phase of demutuali-
zation.
      The first exchange to adopt the private corporation format or to demutualize
was the Stockholm Stock Exchange in 1993.19) Since then, a number of
exchanges have followed suit20) - Helsinki followed Stockholm in 1995,
Copenhagen in 2006, Amsterdam and Bose Italiana in 1997, Australian Stock
                                                         ̈
Exchange in 1998, Athens in 1999, and London, Deutsche Borse (Frankfurt) and
Euronext (Amsterdam, Brussels and Paris) Hong Kong and Toronto in 2000.21)
      After the grant of exchange status to the Nasdaq (acronym of National
Association of Securities Dealers Automated Quotations), now the NASDAQ OMX, and
the completion of the merger between the New York Stock Exchange and
Archipelago to form the NYSE Group, Inc. (NYSE) in 2006, most major stock
exchanges of the world have now demutualized.22) More recently, the Chicago

16) A private placement is a transaction in which securities are offered by the issue to a very small
    number of purchasers who are typically very sophisticated. See Stuart M. Litwin & William A.
    Levy, Chapter 14: Securitization of Equipment and Auto Leases, from PLI’s Equipment Leasing-
    Leveraged Leasing, Fifth Edition, Ian Shrank and Arnold G. Gough, Jr. Editors, 1866 PLI/CORP
    333, 372(2011).
17) Aggarwal, supra note 4, at 107.
18) Ibid.
19) Roberta S. Karmel, The Future of Corporate Governance Listing Requirements, 54 SMU L. REV.
    325, 348(2001).
20) At the 1999 Annual Meeting of the World Federation of Exchanges, as many as fifteen out of
    fifty-two exchanges had demutualized, fourteen exchanges had member approval for demutuali-
    zation, and another fifteen were thinking about demutualization, which means that only eight
    exchanges were committed to retaining the mutual form. In another survey in 2003, forty-two
    out of eighty-five exchanges were demutualized, sixteen were in the process of demutualization,
    and twenty-seven had no plans to demutualize. Eighteen out of the forty-two demutualized
    exchanges were listed. See Fleckner, supra note 10, at 2555.
21) See generally Eric J. Pan, A European Solution to the Regulation of Cross-Border Markets, 2
    BROOK. J. CORP. FIN. & COM. L. 133(2007).
                        정누리 / A Study on Demutualization of Stock Exchanges                                   305


Board of Options Exchange, a U.S. options exchange, made its demutualization
IPO in June 2010, and the Warsaw Stock Exchange in Poland was self-listed in
November 2010.23)
      The following <Table 1> provides a summary list of demutualization of
major stock exchanges.

                       <Table 1> Demutualization of Major Exchanges24)

                                           Year of         IPO/listing                  Major products
                                        demutualization       date
 Major European exchanges
 London Stock Exchange                       2000         July 20, 2001        Equity
 NYSE Euronext (Europe)[1]                   2000         July 10, 2001        Equity, and equity, currency,
                                                                                 commodity & interest rate
                                                                                 derivatives
            ̈
 Deutsche Borse                              2000          Feb. 5, 2001        Equity, and equity & interest rate
                                                                                 derivatives
 BME Spanish Exchanges                       2001              −               Equity, and equity & interest rate
                                                                                 derivatives
 SIX Swiss Exchange                          2002               −              Equity
 OMX Group                                   1993          Jan. 1, 1993        Equity, and equity & interest rate
                                                                                 derivatives
                                                                         [3]
 Borsa Italiana                              1997         Oct. 1., 2007        Equity, and equity derivatives
         ̸
 Oslo Bors                                   2001         May 28, 2001         Equity, and equity derivatives
 Major North American exchanges
 NYSE Euronext (U.S.)[1]                     2006         Mar. 7, 2006         Equity
 NASDAQ OMX                                  2001          July 1, 2002        Equity
 Toronto Stock Exchange                      2000         Nov. 12, 2002        Equity
 Chicago Mercantile Exchange[2]              2002         Dec. 6, 2002         Equity, currency, commodity &
                                                                                 interest rate derivatives
 Chicago Board of Trade[2]                   2005         Oct. 19, 2005        Equity, commodity & interest rate
                                                                                 derivatives
 Chicago Board of Options Exchange[2]        2010         June 15, 2010        Equity & interest rate derivatives
 International Securities Exchange[2]        2002          Mar. 8, 2005        Equity derivatives


22) Stavros Gadinis & Howell E. Jackson, Markets as Regulators: A Survey, 80 S. CAL. L. REV. 1239,
    1257(2007).
23) Economist Intelligence Unit, World Exchanges: Sub-sector Update, FIN. SERVICES FORECAST,
    Dec. 14, 2010, at 5, available at 2010 WLNR 25736951.
24) Reena Aggarwal & Sandeep Dahiya, Demutualization and Public Offerings of Financial Exchanges,
    18 (3) J. APPLIED CORP. FIN. 96, 98(2006), available at http://faculty.msb.edu/aggarwal/183final.
    aggarwal.pdf [hereinafter Aggarwal & Dahiya, Public Offerings]. Changes since 2006 have been
    updated by the author of this paper. Also the author has amended the sections of Japan, South
    Korea and Taiwan.
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                                       Year of           IPO/listing            Major products
                                    demutualization         date
 Major Asian/Oceania exchanges
                       [3]
 Tokyo Stock Exchange                     2001               −         Equity, and equity derivatives
 Osaka Securities Exchange                2001          Apr. 2, 2004   Equity, and equity derivatives
 Hong Kong Stock Exchange                 2000         June 27, 2000   Equity, and equity & interest rate
                                                                         derivatives
 Australian Securities Exchange           1998         Oct. 14, 1998   Equity, and equity derivatives
 Taiwan Stock Exchange Corp.              1961              −          Equity
 Korea Exchange                           2005              −          Equity, and equity, currency &
                                                                         interest rate derivatives
 Singapore Stock Exchange                 1999         Nov. 16, 2000   Equity, and equity & interest rate
                                                                         derivatives
 Bursa Malaysia                           2004         Mar. 18, 2005   Equity, and equity & interest rate
                                                                         derivatives
 Philippines Stock Exchange               2001         Dec. 15, 2003   Equity
 New Zealand Stock Exchange               2003         June 3, 2003    Equity
                         [2]
 Sydney Futures Exchange                  2000         Apr. 16, 2002   Equity, currency, commodity &
                                                                         interest rate derivatives

[1] NYSE Group Inc., the operator of the New York Stock Exchange, and Euronext N.V., the
    Pan-European stock exchange operator, merged,25) and began trading under the new name,
    NYSE Euronext, Inc.26) on April 4, 2007.27)
[2] Derivative exchanges.
[3] Borsa Italian was merged with the London Stock Exchange, creating London Stock Exchange
    Group, in an all-share takeover on October 1, 2007.28)


25) NYSE-Euronext Merger Procedures Almost Completed, JAPAN WKLY. MONITOR, Apr. 2, 2007,
    available at 2007 WLNR 6337152.
26) NYSE Euronext Inc. - Effective New Name of NYSE Group, Inc. -, STANDARD & POOR’S DAILY
    NEWS, Apr. 12, 2007, available at 2007 WLNR 7007890.
27) On June 1, 2006, NYSE and Euronext, two separate publicly held companies at the time, signed
    an agreement to combine the two securities trading exchanges in a “merger of equals” resulting
    in the creation of the first trans-Atlantic merger of its kind and the world’s first global exchange.
    The proposed combination was approved by Euronext shareholders on December 19, 2006, and
    by NYSE shareholders on December 20, 2006. Today, NYSE Euronext Inc., is a U.S. holding
    company with U.S. headquarters in New York and international headquarters in Paris. The
    company operates six cash equities exchanges in five countries and six derivatives exchanges in
    six countries, and it represents a combine $30.3 trillion total market capitalization of listed
    companies with approximately $139 billion in average daily trading. See Sara M. Saylor, Are
    Securities Regulators Prepared for a Truly Transnational Exchange?, 33 BROOK. J. INT’L L. 685,
    685(2008).
28) Borsa Italiana itself was listed on the stock market from October 1, 2007, following the takeover
    of the Italian bourse operator by the London Stock Exchange (LSE). New shares in common
    holding company LSE Group PLC are traded in London. The merger between the two bourses
    created a stock exchange with 3,600 listed companies. See Luigi Grassia, LSE Group Begins
    Trading, LA STAMPA, Oct. 1, 2007, at 21, available at 2007 WLNR 19181129.
                     정누리 / A Study on Demutualization of Stock Exchanges                      307


     <Table 1> indicates that most major European and North American stock
exchanges have completed the demutualization including IPO or self-listing,
while major Asian stock exchanges are rather reluctant to go public.
     Demutualization of stock exchanges has frequently led to consolidation
among stock exchanges29) not only within the border but also across the border.
For example, exchanges in Amsterdam, Brussels and Paris have recently combined
to form the Euronext N.V. (Euronext).30) The Singapore Exchange Limited (SGX)
announced to pursue alliance with Japanese stock exchange and has an existing
alliance with the Australian Securities Exchange (ASX)31) - SGX and ASX even
entered into a merger implementation agreement on October 25, 2010,32) although
the proposed merger was eventually terminated after the Treasurer of Australia
officially blocked the deal on April 8, 2011.33) The Hong Kong Exchange is
currently expanding its linkages with the Chinese exchanges.34)

29) Special Study Group of the Committee on Federal Regulation of Securities, American Bar
    Association, Section of Business Law, Special Study on Market Structure, Listing Standards and
    Corporate Governance, 57 BUS. LAW. 1487, 1552(2002) [hereinafter Special Study Group].
30) Euronext N.V. is a holding company for the exchanges incorporated under Dutch law operating
    as a pan-European exchange with a single platform for cash products and one for derivative
    products and is the result of a merger in 2000 of the Paris Bourse, the Amsterdam Stock
    Exchange and the Brussels Stock Exchange. The three exchanges from France, the Netherlands
    and Belgium, respectively, became subsidiaries under the merger with Euronext N.V. acting as
    the holding company. Additionally, in 2002 Euronext N.V. expanded further by acquiring LIFFE
    and merging with BVIP. LIFFE is the London International Financial Futures and Options
    Exchange, which was founded in 1982 in London, United Kingdom and deals mainly with
    derivatives. Its combination with Euronext was to move all of the derivative products that area
    part of Euronext to a single platform with a state-of-art trading platform. BVIP, a Portuguese
    exchange, stand for the Bolsa de Valores de Lisboa e Proto, which was also known as Proto
    Stock Exchange. After merging with Euronext N.V. its name became Euronext Lisbon. These
    additions brought Euronext’s presence across most of Europe by establishing subsidiaries in
    France, Belgium, the Netherlands, United Kingdom and Portugal. See Christopher Osborne, A
    Look at the Globalization of the Exchanges and Its Effects on the United States Market through
    an Analysis of the NYSE and Euronext Merger, 1 J. BUS. ENTREPRENEURSHIP & L. 447, 450-51
    (2008).
31) Special Study Group, supra note 29, at 1552.
32) Australian Securities Exchange, ASX-SGX Merger Proposal, http://www.asx.com.au/resources/
    newsletters/listedˍatˍasx/20101201ˍasx ˍsgxˍmergerˍproposal.htm (last visited Oct. 22, 2011).
33) Australian Treasurer Rejects ASX-SGX Merger Proposal, SING. GOV’T NEWS, Apr. 8, 2011, available
    at 2011 WLNR 6843432.
34) Special Study Group, supra note 29, at 1552.
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      The following <Table 2> provides a list of completed cross-border mergers
among major stock exchanges since 2000.

             <Table 2> Transnational Integration of Major Exchanges since 200035)

      Year              Acquirer                   Target               New operation name
  Oct. 2008          NYSE Euronext        American Stock Exchange       NYSE Amex Equities
  Feb. 2008             Nasdaq                     OMX                    NASDAQ OMX
 June 2007       London Stock Exchange         Borsa Italiana          London Stock Exchange
 Apr. 2007               NYSE                    Euronext                  NYSE Euronext
      2004               OMX               Copenhagen Exchange                  OMX
      2003               OMX                 Helsinki Exchange                  OMX
                                                    LIFFE
      2002              Euronext                                              Euronext
                                         Portuguese Exchange (BVIP)
                                                Paris Bourse
      2000              Euronext         Amsterdam Stock Exchange             Euronext
                                          Brussels Stock Exchange


      Cross-border mergers have been active particularly among the U.S. and
European exchanges. Recent financial market mergers include the link between
the NYSE and Euronext in April 2007; the Chicago Mercantile Exchange and the
Chicago Board of Trade in July 2007; the London Stock Exchange and Borsa
                                     ̈
Italiana in October 2007; Deutsche Borse and the International Securities
Exchange in December 2007; Nasdaq and OMX Nordic exchange in February
2008; the mergers between the stock exchanges and futures exchanges in
Canada and Brazil in May 2008; and the August 2008 link-up between the
Chicago Merchantile Exchange and Nymex futures markets.36)
      Even after the completion of the major mergers between the NYSE and the
Euronext to form NYSE Euronext in 2007 and the Nasdaq and the OMX to form
NASDAQ OMX in 2008, each exchange has sought further possible mergers. For
                                                           ̈
example, on February 9, 2011, NYSE Euronext and Deutsche Borse confirmed

35) Aggarwal & Dahiya, Public Offerings, supra note 24, at 100. Changes since 2006 have been
    updated by the author of this paper.
36) Glenda Korporaal, ASX Door Awaits Bid Knock, AUSTRALIAN, Sept. 27, 2008, at 35, available at
    2008 WLNR 18338023.
                     정누리 / A Study on Demutualization of Stock Exchanges                    309


they would merge to become the worldʼs largest trading platform.37) On October
12, 2011, The Luxembourg Commission de Surveillance du Secteur Financier
                                         ̈
(CSSF) approved the merger of Deutsche Borse and NYSE Euronext.38)



2. Implications of Exchange Demutualization

     Demutualization of stock exchanges brings about both advantages and
challenges. First, demutualization brings with it a different corporate governance
structure where shareholder interests are likely to dominate over the constituent
groups who used to be in a position to exercise veto powers when the
exchanges were operated as not-for-profit, member-owned corporations.39) In
other words, demutualization is likely to result sooner or later in changes in the
corporate mindset to emphasize shareholder value and customer focus.40) Con-
sequently demutualization changes the regulatory framework of stock exchanges
and brings about the tension between an exchange’s role as a self-regulatory
organization (SRO) and at the same time being a for-profit entity.41) A SRO is a
non-governmental entity responsible for regulating its members through the
adoption and enforcement of rules and regulations governing the business
conduct of its members.42)


37) Da-ye Kim, Korea Exchange Seeks to Get Bigger through IPO , KOREA TIMES, Feb. 27, 2009,
    available at 2011 WLNR 3853361.
38) Press Release, Luxembourg regulator OKs DB/NYSE Merger, FUTURES MAG., Oct. 12, 2011,
    available at 2011 WLNR 20900021.
39) Saylor, supra note 27, at 694.
40) Alan Shaw, Singapore Stock Exchange - Demutualization and Listing of the Singapore Exchange
    Limited, in DEMUTUALIZATION OF STOCK EXCHANGES: PROBLEMS, SOLUTIONS AND CASE
    STUDIES 265, 267(Shamshad Akhtar ed., 2002), available at http://www.adb.org/documents/books/
    demutualizationˍstockˍexchanges/demutualization.pdf.
41) Reena Aggarwal & Sandeep Dahiya, Demutualization and Cross-Country Merger of Exchanges, 18
    J. FIN. TRANSFORMATION 143, 146(2006), available at http://www.capco.com/files/pdf/66/03ˍ
    INDUSTRIALIZATION/10ˍDemutualization%20and%20cross-country%20merger%20of%20exchanges.
    pdf [hereinafter Aggarwal & Dahiya, Cross-Country Merger ].
42) Christopher W. Cole, Financial Industry Regulatory Authority (FINRA): Is the Consolidation of
    NASD and the Regulatory Arm of NYSE a Bull or a Bear for U.S. Capital Markets?, 76 UMKC L.
    REV. 251, 255-56(2007).
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      <Table 3> identifies some of main differences of corporate structures of a
mutual and a demutualized exchange.

      <Table 3> Corporate Structures of a Mutual and a Demutualized Exchange43)

        Area                 Mutual Exchange                     Demutualized Exchange
                                                     Public shareholders. These may
    Ownership      Members who trade on the exchange include members, but trading rights
                                                     and ownership are separated
                                                          Usually to:
                                                          • maximize gains from shares;
                   Usually to maintain:
                                                          • grow earnings and dividends;
                   • an efficient, low-cost trading
   Aims of the                                            • improve product range and
                     environment;
    Exchange                                                distribution; and
                   • risk-minimized settlement; and
                                                          • protect brand quality including by
                   • quality regulatory framework.
                                                            having a quality regulatory
                                                            framework.
                                                        • The board is usually more
                   • The board usually comprises mostly   diversified.
                     or solely member representatives.  • Decisions are usually made on a
 Composition of
                   • Decisions are usually made on one    one share, one vote basis.
   board and
                     member, one vote basis.            • Decision making power is vested
 decision-making
                   • Decision making power is vested      with the board, but it is likely to be
                     with the board.                      more strategic leaving management
                                                          to operate the business.
 Acquisitions and                                         Likely to be a priority, given a desire
                  Not usually a priority.
    alliances                                             to maximize growth.
                                                          A key priority as management attempts
                   Not usually a priority. Mutual
                                                          to maximize shareholder share value.
                   exchanges may maintain high levels
     Capital                                              It may be undesirable for the exchange
                   of capital backing on the basis of
   management                                             to maintain high cash/liquid reserves
                   better safe than sorry and to meet
                                                          as it can weigh down the company’s
                   statutory requirements.
                                                          return on assets.



      Second, on the one hand, as seen in the end of the previous chapter,
demutualization allows exchanges not only to form alliances with other exchanges
around world but also to merge and acquire other exchanges. On the other
hand, however, demutualization can expose a self-listed exchange to mergers

43) Shaw, supra note 40, at 268.
                      정누리 / A Study on Demutualization of Stock Exchanges                        311


and acquisitions (M&A) threats. It has been said, in light of demutualization, that
“the rate of M&A activity seems likely to grow” since the dominant consideration
of stock exchanges is now profitability.44) Consequently the number of stock
exchanges operating around the world is likely to shrink.45)
     According to the 2010 Annual Report of the World Federation of Exchanges
(WFE), in 2009, 83 percent of its 53 member exchanges46) was for profit, and 48
percent was publicly listed.47) In meantime, the WFE’s 2008 Annual Report
indicates that in 2007, 8 of the 27 regulated exchanges publicly listed since 2001
were targets of M&A deals, and listed exchanges represent about $300 billion in
market capitalization, of which around $100 billion were subject of mergers.48)


44) Saylor, supra note 27, at 694.
45) Ibid.
46) The 52 members of the WFE as of October 2010 are as follows: Amman Stock Exchange, Athens
    Exchange, Australian Securities Exchange, Bermuda Stock Exchange, BM7FBOVESPA S.A., BME
    Spanish Exchanges, Bolsa de Comercio de Buenos Aires, Bolsa de Comercio de Santiago, Bolsa
    de Valores de Colmbia, Bolsa de Valores de Lima, Bolsa Mexicana de Valores, Bombay Stock
    Exchange Ltd., Bourse de Casablanca, Bourse de Luxembourg, Bursa Malaysia, CBOE Holdings,
    Inc., CME Group, Colombo Stock Exchange, Cyprus Stock Exchange, Deutsche Borse AG, Thë
    Egyptian Exchange, Hong Kong Exchanges and Clearing, Indonesia Stock Exchange, Inter-
    continentalExchange ICE, International Securities Exchange - ISE, Irish Stock Exchange, Istanbul
    Stock Exchange, Johannesburg Stock Exchange, Korea Exchange, London Stock Exchange, Malta
    Stock Exchange, Moscow Interbank Currency Exchange, NASDAQ OMX, National Stock Exchange
                                                                                   ̸
    of India Limited, NYSE Euronext, Osaka Securities Exchange, Oslo Bors, Philippine Stock
    Exchange, Saudi Stock Exchange (Tadawul), Shanghai Stock Exchange, Shenzhen Stock Exchange,
    Singapore Exchange, SIX Swiss Exchange, Stock Exchange of Mauritius, Stock Exchange of
    Tehran, Stock Exchange of Thailand, Taiwan Stock Exchange, Tel-Aviv Stock Exchange, TMX
    Group Inc., Tokyo Stock Exchange Group, Inc., Warsaw Stock Exchange, and Wiener Borse AG.  ̈
    See World Federation of Exchanges, Member Exchanges: 2011 WFE Members, http://www.
    world-exchanges.org/member-exchanges/member-exchanges/2011-wfe-members (last visited Sept.
    24, 2011). As of October 2010 the WFE has 52 members, adding Bourse de Casablanca to its list
    and excluding New Zealand Exchange from its list. Chicago Board Options Exchange became
    CBOE Holdings, Inc. after its demutualization in 2010. See World Federation of Exchanges,
    Member Exchanges: 2010 WFE Members, http://www.world-exchanges.org/member-exchanges/
    member-exchanges/2010-wfe-members (last visited Feb. 27, 2011).
47) WORLD FEDERATION OF EXCHANGES, 2010 WFE ANNUAL REPORT AND STATISTICS 24(2011),
    available at http://www.world-exchanges.org/about-wfe/annual-reports/2010-wfe-annual-report-and-
    statistics [hereinafter WFE 2010].
48) WORLD FEDERATION OF EXCHANGES, 2008 ANNUAL REPORT AND STATISTICS 61(2009),
    available at http://www.world-exchanges.org/files/statistics/excel/WFE%20Annual%20Report%20140509.
    pdf.
312                                 증권법연구 제 12 권 제 3 호 (2011)


      Third, Asian stock exchanges are less active in completing demutualization -
particularly conducting demutualization IPO - than Western stock exchanges.
For example, because the Taiwan Stock Exchange Corp. was originally organized
in the company form in 1961, no demutualizing plan is needed.49) However,
according to Article 127 of Taiwanese Securities and Exchange Law , stocks of a
company-type stock exchange shall not be listed on its own centralized securities
exchange market or on a stock exchange owned by any other person.50)
      In the meantime, the Tokyo Stock Exchange Group Inc. (TSE) was
demutualized on November 1, 2001,51) but has not listed yet despite its several
attempts to go public. At first, TSE’s planned listing was postponed partially due
to disagreements between the exchange and the Financial Services Agency over
the exchange’s management structure as a listed entity, because the regulator
had demanded the exchange to separate its regulatory division from the stock
trading-related division.52) Later TSE planned to conduct an IPO again by the
end of 2009, but on March 25, 2009, the exchange announced to delay going
public until the fiscal year starting April 2010 or later, because the global
financial crisis caused the Tokyo stock market to tumble.53) Postponing an IPO
could be viewed as an effective form of risk management during times of large
financial shocks, because launching an IPO during times of great turbulence in


49) Wanpo (Mina) Wang, The Taiwan Stock Exchange (Taipei, China), in DEMUTUALIZATION OF
    STOCK EXCHANGES: PROBLEMS, SOLUTIONS AND CASE STUDIES 341, 347(Shamshad Akhtar
    ed., 2002), available at http://www.adb.org/documents/books/demutualizationˍstockˍexchanges/
    demutualization.pdf.
50) Ibid.
51) Tokyo Stock Exchange, About TSE: History, http://www.tse.or.jp/english/about/history.html (last
    visited Oct. 30, 2009).
52) Aggarwal & Dahiya, Cross-Country Merger, supra note 41, at 146.
53) Ayai Tomisawa, Tokyo Stock Exchange on IPO: ‘It’s Just Not the Right Timing’, WALL ST. J.,
    Mar. 25, 2009, available at http://online.wsj.com/article/SB123789200663024141.html. According
    to the Wall Street Journal on September 6, 2010, Mr. Atsushi Saito, the President and CEO of
    TSE mentioned in his interview with the Wall Street Journal that “There is no point going public
    as long as [TSE] keeps posting declines in sales and profits. [TSE] is not ruling out the possibility
    to be listed this fiscal year, but [TSE] is probably not going to.” See Ayai Tomisawa, Tokyo Stock
    Exchange Chief Works to Fend Off Rivals, Attract Investors, WALL ST. J., Sept. 6, 2010, available
    at http://online.wsj.com/article/SB100014240527487048551045754 69140783387312.html.
                     정누리 / A Study on Demutualization of Stock Exchanges                      313


financial markets requires a great deal of flexibility, focus and patience among
companies and their bankers.54) On March 10, 2011, TSE announced its plans to
start preparing its IPO and to hold merger discussions with Osaka Securities
Exchange Co.55)




             Ⅲ . Demutualization of the Korea Exchange

1. Structure of the Korea Exchange

     Until 2004, the Korean stock markets consisted of the Korea Stock Exchange
(KSE), established in February 1956, the Korean Dealers Automated Quotations
(KOSDAQ), established in July 1996, and the Korea Futures Exchange (KOFEX),
established in April 1999.56) Then, on January 19, 2005, KRX was created
through the merger of the KSE, the KOFEX and the KOSDAQ, under the Korea
Securities and Futures Exchange Act, and is now the sole exchange in Korea.57)
In the process, the structure of KRX was chosen to be a stock company,
converted from a membership organization. This conversion signifies KRX’s
completion the first phase of exchange demutualization. Because KRX has not
conducted its IPO yet, KRX is still on the verge of the first and second phases
of the demutualization process. In other words, KRX has not completely
demutualized and thus is not a (fully) demutualized exchange yet.
     Since the enactment of the Financial Investment Services and Capital
Markets Act (FSCMA) which was approved by the National Assembly on July 3,

54) Stephen Waite, Dealing with Financial Turbulence: The Case of Nanodynamics, 4 NANOTECH-
    NOLOGY L. & BUS. 485, 485-86(2007).
55) Anna Kitanaka et al., Tokyo Exchange Plans to Merge with Osaka Securities Amid Global
    Takeovers, BLOOMBERG, Mar. 10, 2011, available at http://www.bloomberg.com/news/2011-03-
    09/tokyo-exchange-plans-merger-talks-with-osaka-president-says.html. No further information has
    yet been provided.
56) Economist Intelligence Unit, South Korea: Financial Services Report, FIN. SERVICES FORECAST,
    Oct. 31, 2008, at 1, available at 2008 WLNR 22178344.
57) Mous the Time, FUTURES CHI., Jan. 1, 2006, at 16, available at 2006 WLNR 636810.
314                               증권법연구 제 12 권 제 3 호 (2011)


2007 and became effective on February 4, 2009, KRX is primarily regulated
under Articles 373 to 414, Part VII of FSCMA and provisions of the Commercial
Act on stock companies.58) KRX is established in order to fix and stabilize fair
prices in transactions of securities and exchange-traded derivatives as well as to
facilitate the stability and efficiency of other transactions.59) Under FSCMA, KRX,
headquartered in Busan, is structured to be a stock company with a capital of
not less than 100 billion won.60) According to the WFE, domestic market
capitalization of KRX was around $1,091,911 million in the end of 2010.61) The
highest decision-making body of KRX is its shareholders’ meeting.62)
      The exchange which was originally a government-owned company became
privatized and was incorporated into a membership organization on March 1,
1988.63) However, since January 29, 2009 the exchange has been designated a
public institution that is subject to audit by the Board of Audit and Inspection
and under government control in terms of budget and human resources.64)
Under the Act on the Management of Public Institutions (AMPI), the Ministry of
Strategy and Finance (MOSF) may designate an organization producing over 50
percent of its income from a monopolistic business as a public institution.65)
Since the 2005 merger among the KSE, the KOFEX and the KOSDAQ, the new
exchange has been the only bourse in Korea and has been generating over 50
percent of its income from a monopolistic business. Discussion of whether such

58) Financial Investment Services and Capital Markets Act (hereinafter FSCMA) §374 (2007) (“Except
    as otherwise provided in this Act [FSCMA], the provisions of the Commercial Act on stock
    companies shall apply to the Exchange [KRX].”).
59) Ibid., §373.
60) Ibid., §375.
61) WFE 2010, supra note 47, at 74.
62) KOREA SECURITIES DEALERS ASSOCIATION, SECURITIES MARKET IN KOREA 248(2008),
    http://www.ksda.or.kr/UPLOADFILES/Securities%20Market%20in%20Korea%202008%20(KSDA).pdf.
    See also Korea Exchange, About KRX: Organization, http://eng.krx.co.kr/m9/m9ˍ1/m9ˍ1ˍ4/
    UHPENG09001ˍ04.html (last visited Sept. 24, 2011).
63) Korea Exchange, About KRX: History, http://eng.krx.co.kr/m9/m9ˍ1/m9ˍ1ˍ3/UHPENG09001ˍ03.html
    (last visited Sept. 24, 2011).
64) Ja-young Yoon, Government to Control Paycheck of KRX Employees, KOREA TIMES, Jan. 29,
    2009, available at 2009 WLNR 1730314.
65) Act on the Management of Public Institutions (hereinafter AMPI) §4 (2007).
                      정누리 / A Study on Demutualization of Stock Exchanges                       315


designation was legal or illegal is beyond the scope of this paper.
     According to the announcement by the MOSF on January 24, 2011, KRX is
categorized as a “commissioned-service-based quasi-government institution”66)
among several types of public institutions,67) which makes it difficult to categorize
KRX as a SRO anymore. First of all, it is because SROs are basically non-
governmental organizations, although entrusted with quasi-governmental authority.68)
In other words, while SROs are considered to be quasi-public institutions, they
have traditionally been recognized as private entities69) - not public or government
entities. Secondly, it becomes clearer if compared with designated business of


66) Ministry of Strategy and Finance, Press Release on 2011 Designated Public Institutions 6(Jan. 24,
    2011).
67) Public institutions are classified into three categories in large - public corporations, quasi-
    governmental institutions and non-classified public institutions. Quasi-governmental institutions
    are further subcategorized into fund-management-based quasi-government institutions that are
    quasi-governmental institutions to which the management of a fund is assigned or commissioned
    under the National Finance Act ; and commissioned-service-based quasi-governmental institutions
    that are quasi-governmental institutions other than the fund management the fund-management-
    based quasi-governmental institution. AMPI §5.
68) Ernest E. Badway & Joanthan M. Busch, Ending Securities Industry Self-Regulation as We Know
    It, 57 RUTGERS L. REV. 1351, 1352(2005).
69) Jay A. Dubow et al., Should the 1st Choice Involve Taking the 5th?: Some Possibilities and
    Consequences in SEC Probe, 13-AUG BUS. L. TODAY 23, 24(2004). For this reason, the author
    of this paper does not agree with the statement presented in Asian Capital Market Law and
    Regulation Forum on July 10, 2009. See Suk Hyun, Regulation and Self Regulation for Asian
    Bond Markets Development 8, in Asian Capital Market Law and Regulation Forum: Japan, China
    and Korea (July 10, 2009), available at http://www.globalcoe-waseda-law-commerce.org/activity/
    0710seoul/HyunˍBOK.pdf (indicating KRX as a SRO). The author’s argument can be somewhat
    supported by the World Bank’s Policy Research Working Paper, entitled “Self-Regulation in
    Securities Markets,” published in January 2011. Throughout the paper, KRX is never mentioned
    even once, although the Korean Financial Investment Association (KOFIA) is mentioned quite a
    few times. In addition, the paper does not include KRX in its list of SROs. Examples of SROs
    in the list include ASX, Financial Industry Regulatory Authority, Hong Kong Exchanges &
    Clearing, Japan Securities Dealers Association, KOFIA, LSE, Nasdaq, National Stock Exchange in
    India, NYSE, Osaka Stock Exchange in Japan, SGX, TMX Group in Canada, TSE - but not KRX.
    Of course, the list selects only a few exchanges in the world that are relevant to the topic of
    the paper. However, considering the fact that the list has KOFIA but not KRX may imply a
    subtle issue of uncertainty whether KRX can still be considered to be a SRO or not. See John
    Carson, Self-Regulation in Securities Markets 64-65 (World Bank Sec. Markets Group, Global Cap.
    Markets Dep’t., Fin. & Private Sector Dev., Policy Research Working Paper No. 5542, 2011),
    available at http://www-wds.worldbank.org/external/default/WDSContentServer/IW3P/IB/2011/01/
    24/000158349ˍ20110124091038/Rendered/PDF/WPS5542.pdf.
316                                 증권법연구 제 12 권 제 3 호 (2011)


the Korea Financial Investment Association (KFIA)70) under Article 286 of FSCMA.
The statute explicitly states that the KFIA shall perform self-regulation to maintain
sound trade practice among the members and to protect the interest of investors,71)
but does not indicate such part in regard to KRX.


2. Issues Involved in Demutualization of the Korea Exchange

      (1) Overview

      Under the regime of FSCMA, KRX may conduct its IPO subject to the
supervision of the Financial Services Commission. Article 409 of FSCMA opens
the way for KRX to self-list on its bourse upon approval of the Financial Services
Commission.72) When KRX self-lists its own securities, KRX shall conduct any
investigation of abnormal trading, surveillance of members, ongoing disclosure
and any other management of such listing by itself and report the results thereof
to the Financial Services Commission.73)
      In the end of February 2011, KRX announced its IPO plan purporting to
make it easier to participate in the ongoing consolidation of global stock


70) The KFIA was established on February 4, 2009, which was the enforcement date of FSCMA, in
    response to the Act’s implementation. Korea Financial Investment Association, http://www.
    ksda.or.kr/english/intro/welcome.cfm (last visited Sept. 24, 2011). The KFIA was created through
    the integration of the Korea Securities Dealers Association, established in November 1953, the
    Asset Management Association of Korea, established in May 1996, and the Korean Futures
    Association, established in December 1996, as a non-profit organization. FINANCIAL
    SUPERVISORY SERVICE, FINANCIAL SUPERVISORY SYSTEM IN KOREA 24(2008), available at
    http://english.fss.or.kr/fsseng/emdc/prs/fss ˍv.jsp?btmIndex=169&fssIndex=5140&selectType=
    0&find=. The KFIA aims to coordinate conflicts of interest among market participants, to
    establish a consolidated self-regulatory system, and to advance the Korean capital and derivative
    markets. Hyo-sik Lee, Universal Financial Investment Firms to Be Established, KOREA TIMES,
    Dec. 24, 2008, available at 2008 WLNR 24676720.
71) FSCMA §286 (“The Association [KFIA] shall perform the business falling under each of the
    following subparagraphs as prescribed by the articles of incorporation: 1. Self-regulation to
    maintain sound trade practice among the members and to protect the interest of investors; … ”).
72) Ibid., §409(1) (“The Exchange [KRX] shall, when it lists or de-lists securities issued by the Exchange
    itself, obtain approval of the Financial Services Commission.”).
73) Ibid., §409(2).
                     정누리 / A Study on Demutualization of Stock Exchanges                     317


exchanges.74) However, this is not the first IPO consideration of KRX - the
exchange began to push for its self-listing from 2003.75) For example, the
exchange launched its IPO plan on September 22, 2006, but announced on
August 28, 2007 to indefinitely delay the plan after failing to narrow differences
on several key issues with the government - the MOSF (the former Ministry of
Finance and Economy) and the Financial Services Commission.76)
     One of the controversial issues at that time was the revision of securities
regulation to detach from KRX the exchange’s Market Oversight Commission
which monitors irregularities in stock trading before KRX gets listed on bourse.77)
KRX, however, was against the idea because of the fear that the exchange
would be nothing more than a simple mediator of stock transactions in that
case.78) Also the exchange wanted to decide stock trading commissions on its
own, while the ministry argues that a public operation committee should play
the role.79) In addition, the federation of unions of securities firms strongly
opposed the exchange’s IPO plans, saying that KRX is not ready for such a task
yet and the listing will expose the exchange to M&A threats.80)
     The current situation is not exactly the same as before, although the
fundamentals have not changed much. The reason is that technically at present
KRX is not a SRO but a public institution. Nonetheless, because the government
designates public institutions each year from a zero base,81) it is possible for

74) Jieun Shin, Korea Exchange Considering IPO , WALL ST. J., Feb. 28, 2011, available at http://
    online.wsj.com/article/SB10001424052748704615504576171671523684568.html.
75) Cynthia J. Kim, Korea Exchange Pushes to Go Public, KOREA HERALD, Feb. 27, 2011, available
    at http://www.koreaherald.com/business/Detail.jsp?newsMLId=20110227000243.
76) Hyong-ki Park, Brokerage Stocks Fall on Delayed KRX Listing, KOREA TIMES, Aug. 29, 2007,
    available at 2007 WLNR 16876599.
77) Ja-young Yoon, KRX Listing Should Follow Law Revision: Vice Minister, KOREA TIMES, Aug. 30,
    2007, available at 2007 WLNR 17009359.
78) Ibid.
79) Ibid. The reasoning behind the ministry’s arguments is that as a profit seeking corporation
    monopolizing the market, KRX should not be in charge of judging listing of companies, because
    public interest could be damaged if KRX continuously has such power even after getting listed.
    See Ibid.
80) Hyoung-ki Park, KRX Unions Split over Listing Plan, KOREA TIMES, Aug. 26, 2007, available at
    2007 WLNR 16651119.
318                               증권법연구 제 12 권 제 3 호 (2011)


KRX to be reclassified as a non-public organization, when the exchange no
longer satisfies terms and conditions for a monopoly under relevant regulations.
Two big issues involved in demutualization of KRX - particularly in regard to the
exchange’s self-listing - are: (1) conflicts of interest; and (2) ownership restrictions
and M&A threats. Each is separately discussed in more detail below.

      (2) Conflicts of Interest

      Conflicts of interest are inherent in a demutualized exchange, because the
exchange now attempts to maximize profits while still performing its regulatory
functions. Incentives to under-regulate abound and may lead to problems such
as underfunding an exchange’s regulatory arm for a more impressive income
statement, or hesitating to discipline a member at fault for fear of losing that
memberʼs business.82) Conversely, an exchangeʼs for-profit status may create an
incentive to over-regulate because the fines the exchange levies against their
members go directly into their coffers, providing immediate revenue.83)
      Self-listing would pose issues of conflicts of interest to KRX, even though
KRX is now a public institution. To be a public institution does not mean to be
totally deprived of its self-controlling management.84) Some duties that KRX shall
perform under Article 377 of FSCMA are: establishment of and operation of the
securities and derivative markets; transactions of securities and exchange-trade
derivatives; listing of securities; and report and disclosure of a listed corporation.
Pursuant to Article 377, FSCMA further allows the exchange to prescribe the
Listing Regulations of securities for reviewing the securities to be listed and for
managing listed securities in Article 390, and to make the Disclosure Regulations

81) Ja-young Yoon, Debate Heats Up Over Bourse Operator, KOREA TIMES, Jan. 29, 2009, available
    at 2009 WLNR 1186977.
82) Andrew J. Cavo, Weissman v. National Association of Securities Dealers: A Dangerously Narrow
    Interpretation of Absolute Immunity for Self-Regulatory Organizations, 94 CORNELL L. REV. 415,
    423-24(2009).
83) Ibid., at 424.
84) AMPI §3 (“The Government shall guarantee the self-controlling management of public institutions
    to establish the accountable management system in public institutions.”).
                     정누리 / A Study on Demutualization of Stock Exchanges          319


of stock-listed corporations to report, disclose and mange the matters related to
such corporations in Article 391.
     In other words, although being a public institution, KRX is a primary
institution that reviews an applicant for listing and makes a decision on the
result of listing eligibility review pursuant to its Listing Regulations. Furthermore,
listed companies are required to submit their disclosure documents to KRX
pursuant to its Disclosure Regulations. This means that self-listing of shares of
KRX may pose issues of conflicts of interest if listing or disclosure standards and
its oversight are composed by the exchange concerned. However, the listing
standards for KRX should be the same for other listed companies, and so do the
disclosure standards for the exchange. As a public institution now KRX is subject
to stricter audit, inspection and scrutiny of the government. Such government
involvement should work in a way that helps monitor conflicts of interest issues
more closely.
     Under Article 32 of the KOSPI Market Listing Regulation, unless otherwise
indicated, requirements for initial listing of stocks include, but not limited to, the
following: the companies issuing such stocks have been in continuous operation
for at least three years; the number of shares to be listed shall be at least
1,000,000 and the equity capital shall be at least KRW 10 billion or the base
market value shall be at least KRW 20 billion; the largest shareholder on the
date that is one year before the application date for listing eligibility review shall
not have been changed for one year period thereafter; no restriction shall be
placed on transfer of shares; and the companies should meet requirements
regarding stock distribution, business performance, auditor’s audit opinion.85) As
a stock company established under the special laws, KRX is eligible for
exemption from the aforementioned requirements except the stock distribution
requirement.86) In addition, as previously mentioned, KRX should receive
approval from the Financial Services Commission when it becomes listed.

85) KOSPI Market Listing Regulation §32(1) (2005).
86) Ibid., §32(4).
320                               증권법연구 제 12 권 제 3 호 (2011)


       According to the KOSPI Market Disclosure Regulation, a listed company
shall faithfully report any matters subject to disclosure obligations - including
but not limited to material information, information subject to fair disclosure,
annual reports - and be diligent in order to avoid any change or reversal of
details already reported.87) After going public, KRX should observe such
disclosure obligations like other listed companies.
       Some other duties of KRX under Article 377 of FSCMA are: surveillance of
abnormalities in trading, including abnormal fluctuation of prices or volumes of
securities or exchange-traded derivatives and the investigation of members; and
self-resolution of disputes (limited to cases where any related party applies for
resolution) arising from transactions in the securities market, KOSDAQ and the
derivatives market. FSCMA further requires the exchange to establish the market
supervision committee88) and the market supervision committee to make Market
Surveillance Regulations89) as well as Dispute Resolution Regulations.90)
       Accordingly KRX internally has the Market Oversight Commission. According
to KRX’s current website, “the Market Oversight Commission is an internal agency
of KRX pursuant to laws governing the [exchange] and performs self-egulation
duties on securities and futures markets.”91) However, because precisely KRX is
not a SRO anymore, it would be more appropriate to state that the Market
Oversight Commission performs designated authorities related to self-controlling
management rather than self-regulation duties. The term, “self-controlling
management”, is used in Article 3 of AMPI. KRX’s more emphasized public
characteristics as a public institution would mandate greater separation between
its regulatory and operational functions.
       In detail, the Market Oversight Commission conducts the following business


87)   KOSPI Market Disclosure Regulation §4 (2005).
88)   FSCMA §402.
89)   Ibid., §403.
90)   Ibid., §405.
91)   Korea Exchange, About KRX: Divisions, http://eng.krx.co.kr/m9/m9ˍ1/m9ˍ1ˍ5/m9ˍ1ˍ5ˍ5/UHPENG
      09001ˍ05ˍ05.html (last visited Sept. 30, 2011).
                       정누리 / A Study on Demutualization of Stock Exchanges                   321


such as: market surveillance, investigation of abnormal trading and supervision of
members; cross-market surveillance among the securities market, KOSDAQ and
the derivative market; discipline of members or decision on the requests for
disciplinary measures against executives or employees concerned as a result of
the investigation of abnormal trading, supervision of members, cross-market
surveillance among the securities market, the KOSDAQ and the derivative
market; self-resolution; and establishment, amendment and repeal of the Market
Surveillance Regulations and the Dispute Resolution Regulations.92)
       As previously mentioned, according to Article 409(2) of FSCMA, it is KRX
itself that shall conduct any investigation of abnormal trading, surveillance of
members, ongoing disclosure and any other management of its self-listing. Thus
it is the Market Oversight Commission, an internal body of KRX, which would
perform such investigation and surveillance of the exchange. What the Financial
Services Commission does in the process is just to get reported the results from
the exchange.93) Although FSCMA requires KRX to obtain approval from the
Financial Services Commission when the exchange lists or de-lists securities
issued by KRX itself,94) this measure may not be sufficient to handle potential
conflicts of interest.
       Different jurisdictions have dealt with conflicts of interest in different ways
- some such as Australia and the United Kingdom took away some regulatory
oversight functions that had been delegated to exchanges, while others such as
Singapore kept both commercial and supervisory functions within one exchange.
Cases of Australia and Singapore are introduced in more detail below.
       When the Australian exchange went public, its government was assigned
the task of overseeing exchange disclosure to shareholders.95) The Corporations

92)   FSCMA §402(1).
93)   Ibid., §409(2).
94)   Ibid., §409(1).
95)   Pamela S. Hughes, Regulation of a Demutualized Exchange (Canada), in DEMUTUALIZATION OF
      STOCK EXCHANGES: PROBLEMS, SOLUTIONS AND CASE STUDIES 163, 171-72 (Shamshad Akhtar
      ed., 2002), available at http://www.adb.org/documents/books/demutualizationˍstockˍexchanges/
      demutualization.pdf.
322                                증권법연구 제 12 권 제 3 호 (2011)


Act 2001 has conferred power on the Australian Securities and Investments
Commission (ASIC) to administer listing of ASX in relation to ASX as a self-listed
exchange.96) ASIC and ASX have entered into a number of Memorandum of
Understanding (MOU) regarding roles of ASIC and ASX upon ASX’s self-listing.97)
ASIC supervises ASX’s self-listing and undertakes the day-to-day supervision of its
compliance with listing rules to ensure that the exchange is subject to
independent scrutiny.98) ASX is obligated to notify ASIC of its rules and pay fees
related to self-listing to ASIC.99)
      To ensure fair operation of its markets, ASX has placed its operational
supervisory functions in a wholly-owned subsidiary, ASX Market Supervision Pty
Limited (ASXSM), which operates under safeguards of independence and monitors
compliance with ASX listing requirements, ASX rules as to broker participation in
its markets, and ASX clearing and settlement rules.100) ASXSM was established
on July 1, 2006 to assume responsibilities for all of ASX’s key operational
supervisory functions, and as a result ASX Supervisory Review Pty Limited (ASXSR)
ceased operations on October 30, 2006.101) ASXSR embodied a unique experiment
among regulatory responses to conflicts of interest facing self-regulation following
the demutualization and listing of ASX in 1998.102) In contrast to exchange
subsidiaries or spin-offs in the United States and Canada, ASXSR did not itself

96) Claire Grose, Demutualization of Exchanges - The Conflicts of Interest (The Australian Regulator’s
    Experience), in DEMUTUALIZATION OF STOCK EXCHANGES: PROBLEMS, SOLUTIONS AND
    CASE STUDIES 157, 157 (Shamshad Akhtar ed., 2002), available at http://www.adb.org/documents/
    books/demutualizationˍstockˍexchanges/demutualization.pdf.
97) The MOU dated June 30, 2004 replaces three existing MOUs between ASIC and ASX, dated
    December 18, 1992 related to markets; dated November 5, 1993 related to membership matters;
    and dated September 23, 1997 related to companies matters, respectively. See Memorandum of
    Understanding between Australian Securities and Investment Commission and Australian Stock
    Exchange Limited ¶ 8 (2004), available at http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/
    MOUˍASX&ASIC.pdf/$file/MOUˍASX&ASIC.pdf.
98) Hughes, supra note 95, at 172.
99) Shamshad Akhtar, supra note 12, at 22.
100) Gadinis & Jackson, supra note 12, at 1321.
101) Media Release, Australian Sec. Exch., ASX Markets Supervision Assumes Responsibility for ASX
     Supervisory Review, Oct. 9, 2006, available at http://www.asxgroup.com.au/media/PDFs/
     mr20061009ˍasxˍsr.pdf.
102) Gadinis & Jackson, supra note 12, at 1321 n.277.
                     정누리 / A Study on Demutualization of Stock Exchanges                   323


exercise the regulatory powers granted by law to ASX and rather acted as an
independent auditor that reviewed ASXʼs own performance of its regulatory
functions.103)
     In the meantime, capital markets of Singapore operate under a dual-level
regulatory framework. The Monetary Authority of Singapore (MAS), as the
statutory regulator, has overall supervision of the financial and capital markets,
including SGX itself, and maintains oversight of the exercise of regulatory
responsibilities delegated to SGX, while SGX functions as the frontline market
regulator.104) Such dual-level regulatory framework became more settled on
September 1, 2007 when oversight of corporate governance practices of listed
companies was transferred to MAS and SGX from the Council on Corporate
Disclosure and Governance (CCDG).105) CCDG was created in August 2002 to set
accounting standards, strengthen the framework on disclosure practices and
reporting standards, and to review and make recommendations to the Ministry of
Finance on revisions to the Code of Corporate Governance.106)
     The Exchanges (Demutualization and Merger) Act 1999 has given MAS the
power to issue directives to SGX in the interest of ensuring fair and orderly
securities and futures markets and proper management of systemic risks, and
thus MAS has the authority to put things right, where any potential conflicts of
interest become real.107) In addition, a series of Deeds of Undertaking by SGX


103) Ibid.
104) Tharman Shanmugaratnam, Speech at SGX’s 10th Anniversary Commemoration (Sept. 9, 2009),
     available at http://www.mas.gov.sg/newsˍroom/statements/2009/SpeechˍbyˍMrˍTharmanˍShan-
     mugaratnam ˍMOF ˍatˍSGXˍ10thˍAnniversaryˍCommemorationˍSGXˍEventˍPlaza.html.
105) Joint Press Released by MAS and SGX, MAS and SGX to Oversee Corporate Governance for
     Listed Companies from 1 September 2007, May 29, 2007, available at http://www.mas.gov.sg/
     newsˍroom/press ˍreleases/2007/MASˍandˍSGX ˍto ˍoverseeˍcorporate ˍgovernance ˍfor ˍlistedˍ
     companiesˍfrom ˍ01Sep2007.html.
106) Siow Li Sen, Independent Directors an Issue to Work On, BUS. TIMES (SING.), May 31, 2007,
     available at 2007 WLNR 10124160.
107) Lee Boon Ngiap, Regulation of a Demutualized Exchange (Singapore), in DEMUTUALIZATION
     OF STOCK EXCHANGES: PROBLEMS, SOLUTIONS AND CASE STUDIES 177, 179 (Shamshad
     Akhtar ed., 2002), available at http://www.adb.org/documents/books/demutualizationˍstockˍ
     exchanges/demutualization.pdf.
324                              증권법연구 제 12 권 제 3 호 (2011)


and the Singapore Exchange Securities Trading (SGX-ST) in favor of MAS covers
issues entitled in the Deed as “Listing Arrangements”, “Conflict of Interests
Arising from Listing of SGX Shares on the SGX-ST”, Conflict of Interests Arising
from SGX’s Regulatory and Commercial Functions” and “Market Surveillance and
Integrity.”108) SGX pays any fee in connection with its self-listing to MAS.109)
      Conflicts of interest are inherent in demutualized exchanges. There is no
single resolution of the issue that is appropriate for all countries. Nevertheless
possible types of regulatory structure to deal with conflicts of interest upon the
completion of KRX’s demutualization can be narrowed down into two in large.
One is that of Australia - separation of oversight from KRX, and the other is
that of Singapore - delegation of oversight to KRX. However, either way, KRX
should be assumed as an issuer like other listed companies when KRX lists and
delists on its bourse.
      Because KRX is currently a public institution subject to a higher level of
government scrutiny, the former method appears a bit more suitable for the case
of KRX. Then there would two further options - either to have an independent
body similar to ASXSM of ASX to perform the exchange’s operational supervisory
functions, or to shift regulatory authority from KRX to a financial regulator as in
case of the United Kingdom. As to the first option, rather than creating a new
body, making the Market Oversight Commission, now an internal body of KRX,
independent of KRX can be considered. As to the second option, enhancing
powers of the Financial Services Commission can be considered.
      The Financial Services Authority in the United Kingdom undertook many
powers that the London Stock Exchange (LSE) previously monopolized, including
the power to decide on listing applications for the stock exchangeʼs markets.110) As


108) Deed of Undertaking by the SGX and Singapore Exchange Securities Trading in favor of
     Monetary Authority of Singapore (2010), available at http://qawww.sgx.com/wps/wcm/connect/
     107827004be9a020ac3ebf5e70022906/SGX ˍDeed%2520of%2520Undertaking ˍ15mar07.pdf?MOD=
     AJPERES [hereinafter DOU].
109) DOU ¶ 3.6.
110) Gadinis & Jackson, supra note 12, at 1266.
                     정누리 / A Study on Demutualization of Stock Exchanges                   325


a result, since May 1, 2000, the Financial Services Authority, in its capacity as the
UKʼs listing authority, has set listing standards for the Official List of the LSE.111)
The case of Australia is distinguished from that of the United Kingdom. ASIC
assumed direct listing authority over the ASX, as a listed issuer of securities, but
permitted the ASX to retain listing authority over all other listed issuers.112)
     Furthermore, according to KRX’s Membership Regulation which stipulates
necessary matters with respect to administration of its members pursuant to
Article 387 of FSCMA, members of KRX pay membership-related fees to KRX. In
addition, the members are required to pay fees related to listing to KRX in
accordance with KRX’s Listing Regulations and Enforcement Rules of Listing
Regulations. When KRX gets listed, KRX should meet criteria for member
admission under the Membership Regulation. However, fees related to self-listing
should be managed by an independent authority from and other than KRX -
probably the Financial Services Commission.
     In the process of going public, it is required for KRX to work in close
cooperation with the Financial Services Commission. A series of agreements such
as memorandum of understanding or deed of undertaking might be necessary
between KRX and the Financial Services Commission.

     (3) Shareholding Restrictions and M&A Threats

     The primary driver for demutualization is common among exchanges - to
meet increased competition from other exchanges, including non-traditional
trading markets such as ECNs or alternative trading markets.113) The growing
competitive pressure has further triggered a wave of mergers and alliances
among securities markets to maximize economies of scale, accessibility and

111) A. Douglass Harris, The Impact of Hot Issue Markets and Noise Traders on Stock Exchange
     Listing Standards, 56 U. TORONTO L.J. 223, 233(2006).
112) Special Study Group, supra note 29, at 1552.
113) Roberta S. Karmel, Motivations, Mechanics and Models for Exchange Demutualizations in the
     United States, in DEMUTUALIZATION OF STOCK EXCHANGES: PROBLEMS, SOLUTIONS AND
     CASE STUDIES 59, 61 (Shamshad Akhtar ed., 2002), available at http://www.adb.org/documents/
     books/demutualizationˍstockˍexchanges/demutualization.pdf.
326                             증권법연구 제 12 권 제 3 호 (2011)


market reach, while providing global trade facilities through around the clock
trading.114)
      KRX has attempted to catch up with such trend by setting up new stock
exchanges abroad and building up alliances with overseas exchanges through
exporting its IT system to those exchanges and helping them become
modernized. Although this kind of international cooperation is desirable and thus
should be encouraged, it does not directly achieve economies of scale. Because
KRX has not been listed on a bourse yet, shares of KRX can only be traded
through private placement. This makes it difficult for KRX to pursue M&As, stake
swaps and cross-listings with other bourses. It is what concerns KRX and why
KRX wants to go public.115)
      In addition, shares of KRX are subject to shareholding or ownership
restrictions. Ownership restrictions are a controversial issue. On the one hand,
such restrictions fetter a market for corporate control and thus cause inefficiency;
while on the other hand, ownership restrictions are necessary because it is
undesirable on public policy grounds to allow an individual or a small group to
control a stock exchange.116) Securities regulators often place restriction on
ownership by one holder or a group of holders to non-controlling stakes of five
to ten percent in order to avoid stock exchanges operating in special or limited
interests.117) In this regard, such shareholding limit is recognition of a potential
conflict of interest.
      In case of SGX, other than strategic owners should receive MAS’s approval
for holdings beyond five percent, while strategic owners - financial institutions

114) Shamshad Akhtar, supra note 12, at 6.
115) The following is an excerpt from an interview of Mr. Kim, Bong-soo, marking his first
     anniversary as chairman and CEO of KRX on February 25, 2011. “Going public is a matter of
     survival. … If we do not get bigger, we will get relegated to a small stock market in the
     corner of Asia.” See Da-ye Kim, supra note 37.
116) David Holthouse, The Structure of a Demutualized Exchange - The Critical Issues, in
     DEMUTUALIZATION OF STOCK EXCHANGES: PROBLEMS, SOLUTIONS AND CASE STUDIES
     73, 76 (Shamshad Akhtar ed., 2002), available at http://www.adb.org/documents/books/
     demutualizationˍstockˍexchanges/demutualization.pdf.
117) Shamshad Akhtar, supra note 12, at 8.
                     정누리 / A Study on Demutualization of Stock Exchanges                      327


or government-linked entities - are allowed to go beyond five percent but
should obtain MAS’s approval for holdings above ten percent.118) Subsequently
the shareholding limit on SGX is generally considered to be 10 percent. In the
meantime, MAS holds 23 percent stake in SGX as of February 17, 2011.119)
     In case of ASX, shareholding was initially subject to a five percent limit, but
at the request of the ASX, the Australian Government proposed to lift the limit
to fifteen percent.120) ASX considered that the five percent limit would provide
little benefit as a means of promoting market integrity.121) Anyone wanting to
buy more than 15 percent has to apply to the Minister for Financial Services and
Regulation to seek a variation of the limit, and a higher limit may be approved
if the acquisition is the national interest.122) Accordingly the proposed merger
agreement between ASX and SGX required a change to the ownership limit on
ASX, and the Australian government blocked the deal amid national interest
concerns. It was claimed that such a merger would diminish Australia’s
economic and regulatory sovereignty over the exchange, which could only be
justified if there were very substantial benefits for Australia, but opportunities
offered under the proposal were not sufficient enough to justify the loss of
sovereignty.123)
     In case of KRX, no one shall hold stocks in excess of five percent of the
total number of outstanding stocks with voting rights issued by KRX except for
cases allowed under Article 406 of FSCMA.124) Exceptions to the five percent

118) Betty M. Ho, Demutualization of Organized Securities Exchanges in Hong Kong: The Great
     Leap Forward, 33 LAW & POL’Y INT’L BUS. 283, 316(2002).
119) Isabella Steger, SGX-ASX Merger Still Faces a Number of Obstacles, WALL ST. J., Feb. 17, 2011,
     available at http://blogs.wsj.com/exchange/2011/02/17/sgx-asx-merger-still-faces-a-number-of-
     obstacles/.
120) Ho, supra note 118, at 315.
121) Holthouse, supra note 116, at 76-77.
122) Press Release, Joe Hockey, ASX Ownership Limits Free Up (Oct. 10, 2000), available at http://
     192.195.49.97/DisplayDocs.aspx?doc=pressreleases/2000/065.htm&pageID=003&min=jbh&Year=
     2000&DocType=0.
123) Jeremy Thompson, Swan Vetoes ASX Takeover, AUSTL. BROAD. CORP. (ABC) NEWS, Apr. 7,
     2011, available at 2011 WLNR 6780874.
124) FSCMA §406(1).
328                               증권법연구 제 12 권 제 3 호 (2011)


rule are allowed for situations such as where a collective investment scheme,
excluding a private equity fund, holds the stocks; where the approval from the
Financial Services Commission is obtained for the necessity of cooperating with
foreign exchanges; or where the government holds the stocks.125) Although KRX
is classified as a quasi-governmental organization, shares of KRX are still owned
by securities and futures companies.126) Accordingly KRX does not have any
shareholder with more than five percent of its shares.
      Here the question is whether KRX should lift the ceiling on shareholding
which is currently set at five percent upon its full demutualization. As a matter
of public policy, no individual investor should be allowed to hold a predominant
position in an exchange. Meanwhile, a shareholding limit which is sufficiently
high enough to facilitate investment by strategic investors would be desirable in
line with the exchange’s efforts to globalize, thereby increasing its effectiveness
to compete in the global market place. It gets harder to find an optimal level of
ownership restrictions when also considering that such restrictions function as a
safeguard against takeovers. Thus the one question regarding the scope of
ownership restrictions on KRX leads to another: whether KRX is ready to face
M&A threats. In other words, the other question is whether there are enough
countermeasures against potential hostile takeovers particularly by foreign
investors or foreign exchanges.


125) Ibid., §406(1).
126) According to 2010 Annual Report, KRX is owned by Kyobo Securities, Shinhan Investment,
     Korea Investment & Securities, Daishin Securities, Daewoo Securities, Shinyoung Securities,
     Eugene Investment & Securities, Hanyang Securities, Meritz Securities, Woori Investment &
     Securities, Bookook Securities, Hana Daetoo Securities, Hyndai Securities, Hanwah Securities,
     Yuhwa Securities, Tong Yang Securities, SK Securities, Solomon Investment & Securities, NH
     Investment & Securities, Golden Bridge Investment & Securities, Samsung Securities, Dongbu
     Securities, JP Morgan Securities (Far East), KB Investment & Securities, Macquarie Securities,
     Prudential Investment & Securities, Citigroup Global Market Korea Securities, KB Futures, NH
     Investment & Futures, BS Securities, Samsung Futures, Woori Futures, KEB Futures, Eugene
     Investment & Futures, Hyundai Futures, KR Futures, Hanmang Securities, Small Business
     Corporation, Korea Securities Finance Corporation and Korea Financial Investment Association.
     KOREA EXCHANGE, 2010 ANNUAL REPORT 17 (2011), available at http://eng.krx.co.kr/m9/m9
     ˍ1/m9ˍ1ˍ7/JHPENG09001ˍ07.jsp.
                    정누리 / A Study on Demutualization of Stock Exchanges                329


     The exceptions clause under Article 406 of FSCMA can be used as a
safeguard to prevent potential threat of a hostile takeover particularly by foreign
bourses as well as foreign investors after the completion of KRX’s self-listing, if
occurs. Currently the Korean government does not hold any share of KRX, but
the government can acquire shares of KRX for the purpose of protecting KRX.
Because nowadays KRX is a public institution, such measure would be more
easily justified than before. As stated before, MAS is a major shareholder of
SGX.
     In addition, the requirement to obtain the Financial Services Commission’s
approval when cooperating with foreign exchanges can be employed to block a
merger plan in the future as in case of the Australian government’s action taken
with regard to the proposed merger between ASX and SGX. As previously
indicated, the Australian government blocked the deal on national interest
grounds. “National interest” specifically includes “sovereignty and security interests”,
competition issues, economic impacts, other government policies and the
character of the investor.127) The Financial Services Commission needs to set
legal standards to avoid ambiguity and confusion when a similar deal is
proposed between KRX and some foreign exchange in times to come.
     As the matter stands, it is not so definite whether defensive measures to
repel future hostile takeover attempts are completely prepared in connection
with KRX’s going public. Even so, increasing ownership limits on KRX to 10
percent from 5 percent would be worth deliberation and could be feasible.
Applying special or higher restrictions to foreign ownership can be thought as a
protective device to prevent hostile takeovers by foreign investors including
foreign exchanges. However, such foreign ownership restrictions may impede
KRX’s ability to achieve global alliances and cooperation so that the exchange
would find itself hard to compete for listings and investment capital.



127) Peter Timmins, FOI Requests an Unfortunate Distraction Says FIRB Chairman, OPEN & SHUT,
     June 8, 2011, available at 2011 WLNR 11477633.
330                              증권법연구 제 12 권 제 3 호 (2011)




                                       Ⅳ . Conclusion

      Nowadays demutualization of stock exchanges is no longer unusual. Many
stock exchanges around the world have already demutualized in order to
achieve economies of scale as a response to increased competition. Exchange
demutualization commences when the membership of a traditional non-profit
organization that operates a stock exchange reorganizes the exchange as a
for-profit institution, and concludes when the exchange goes public and thus
become listed.
      KRX takes form of a stock company, converted from a membership
organization, but has not conducted its IPO yet. Thus demutualization of KRX is
not fully completed. In order to achieve economies of scale and successfully
survive in this era of a tough global competition, it would be desirable for KRX
to get listed. It is because the eventual winners in the process would be exchanges
that attract order flow and thus provide liquidity to investors.128) Although KRX
is currently designated as a public institution, fundamental issues revolving around
KRX’s self-listing are still the same as when KRX was a SRO.
      It is true that a demutualized exchange can invite public besides its own
members and more actively pursue mergers and other forms of strategic alliances
with other exchanges in the world. However, the converse can also happen at
the same time - the exchange gets exposed to threats of mergers, acquisitions
and takeovers by other exchanges. It has not been proved whether KRX is ready
for exposure to future M&A upon its IPO. However, setting a stricter bar for
foreign ownership is not recommendable as a defensive measure against hostile
takeovers, considering that such foreign ownership restrictions may damage
KRX’s relationship with foreign exchanges or foreign investors. In addition, lifting
ownership limits on KRX to 10 percent from 5 percent would be worthy to


128) Aggarwal, supra note 4, at 107.
                    정누리 / A Study on Demutualization of Stock Exchanges               331


consider.
     Besides, self-listing can cause conflicts of interest. When KRX lists itself on
its bourse, KRX must be treated fairly and equally like other listed companies.
There is no single model that is appropriate for all countries, and neither is
there a perfect model for a single country. Nevertheless in order to handle
conflicts of interest upon the completion of KRX’s demutualization, the following
alternatives can be considered to adopt: to let both commercial and supervisory
functions stay within KRX so as KRX to be the frontline market regulator; to
have an independent body performing KRX’s operational supervisory functions,
or to shift regulatory authority from KRX to the Financial Services Commission.
In the meantime, pay fees related to KRX’s self-listing should be managed by an
independent authority from and other than KRX - most likely the Financial
Services Commission.
     For KRX to be a listed exchange and thus to be completely demutualized,
KRX should resolve many issues posed in the process. In order to prepare well
for post-demutualization and reap benefits of demutualization, KRX should plan
in advance, including, but not limited to, an appropriate organization structure,
risk management strategy, corporate governance model, business model, and
ownership structure.




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                    정누리 / A Study on Demutualization of Stock Exchanges     337


The Korean Journal of Securities Law, Vol. 12, No. 3, 2011




           증권선물거래소의 디뮤추얼라이제이션에 대한 법적 연구
                             - 한국거래소를 중심으로 -




                                                                          정 누 리




【 초 록】
디뮤추얼라이제이션이란 일반적으로 제한된 조직원만을 대상으로 하는 배타적 단
체가 회원제 영리법인으로 체제를 개편하는 과정을 말한다. 한편 증권선물거래소의
디뮤추얼라이제이션이란 거래소가 조직원 소유의 비영리단체에서 주주 소유의 영리
목적 주식회사로 전환되는 과정을 의미한다. 증권선물거래소의 디뮤추얼라이제이
션은 증권거래소가 기존의 비영리 배타적 회원제 조직에서 주식회사제의 영리법인
으로 조직개편되는 단계의 시점에서부터 증권거래소가 공시상장되는 단계의 기점
까지, 여러 단계를 거쳐 진행된다.

오늘날 증권선물거래소의 디뮤추얼라이제이션은 더이상 생소하지 않다. 치열해지
는 경쟁 속에서 전세계의 이미 많은 증권선물거래소들이 디뮤추얼라이제이션 단행
을 통해 규모의 경제를 추구하고 있다. 세계 대형 거래소간 활발히 일어나고 있는
인수⋅합병의 추세에 대응하고자 2011년 2월말 한국거래소는 기업공개계획을 발표
하였다. 한국거래소는 주식회사의 형태를 취하고 있으나 그 기업공개는 아직 이루
어지 않았다. 따라서 한국거래소가 상장된 거래소가 된다는 것은, 이는 곧 마침내
한국거래소의 디뮤추얼라이제이션이 완성된다는 것을 의미한다. 한국거래소는 지
난 2003년부터 기업공개를 추진해 왔지만, 2009년 1월 29일부터 한국거래소가 공
공기관으로 지정됨에 따라 현 상황은 기존과 다소 다르다.

본고는 한국거래소의 디뮤추얼라이제이션 및 이와 관련된 법적인 문제를 다루는
338                증권법연구 제 12 권 제 3 호 (2011)


것을 주요 목적으로 한다. 한국거래소 관련 사안을 본격적으로 다루기에 앞서, 본
고는 먼저 증권선물거래소의 디뮤추얼라이제션 전반적인 개요 및 그 의미에 대해
검토한다.


주제어: 증권선물거래소 / 자율규제기관 / 공공기관 / 디뮤추얼라이제이션 / 상장 / 자기상장 / 이해
     상충 / 소유권제한 / 인수 ⋅합병 위협

								
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