Kiwoom Securities, which prides itself on its top-notch IT capabilities in the securities industry, has faced embarrassment due to a delay in stock order processing that occurred for two consecutive days. Following a thorough inspection, the system is currently operating normally, but internally at Kiwoom Securities, there is a climate of tension as they cannot let their guard down over possible errors that may arise again. Complaints from investors who missed trading opportunities have reportedly exceeded 10,000.
The incident coincidentally occurred right after Kim Dong-jun, the eldest son of the late Kim Ik-rae, chairman of DaouKiwoom Group, joined Kiwoom Securities as an internal director. As Kiwoom Securities revs up for the second-generation management transition, Director Kim's crisis response capabilities are also being put to the test.
◇ 10,000 complaints following consecutive errors
According to the financial investment industry, after the stock order processing delays in Kiwoom Securities' trading system (MTS·HTS) occurred on the 3rd and 4th, over 10,000 Voc (Voice of the Customer) reports poured in by the 7th. Most inquiries were related to compensation for missing stock trading opportunities. Kiwoom Securities stated, "In cases where losses occurred due to order delays, we will promptly review compensation criteria and procedures in sequence."
On the 3rd and 4th, order processing delays were observed in Kiwoom Securities' system for two consecutive trading days. Kiwoom Securities reported that the sudden increase in trading volume was to blame and indicated that the system had been "normalized," yet the same problem recurred even after the announcement. Ultimately, Kiwoom Securities completely suspended services over the weekend (5th and 6th) to conduct a thorough inspection of the system.
On the 7th, both the KOSPI and KOSDAQ indices plummeted by over 5%, and a sell-side circuit breaker (which limits the effectiveness of program trading bids for 5 minutes during a sharp drop in futures prices) was triggered for the first time this year in the securities market. Fortunately, no errors such as order processing delays occurred in the Kiwoom Securities system again.
However, the atmosphere at Kiwoom Securities remains unsettled. This is due to the anxiety over when another issue might arise. There are concerns among Kiwoom Securities employees that a sudden influx of orders could lead to bottlenecks in the connection server, similar to the previous incident. A Kiwoom Securities official noted, "We will do our best to prevent this situation from recurring and will work hard on delayed compensation."
As Daou Technology, an IT company, is its parent company, Kiwoom Securities has confidently demonstrated its IT competitiveness thus far. When setting up an automated order transmission system (SOR) to launch alternative trading platforms last month, unlike other securities companies that adopted SORs created by KOSCOM or Next Trade, Kiwoom Securities uniquely chose its self-developed system. An interview with a Kiwoom Securities IT executive who led the in-house SOR development was published in some media. However, experiencing the worst system instability has increased feelings of embarrassment.
◇ "The crisis response capability of second-generation owner Kim Dong-jun is being tested"
Kiwoom Securities is a securities company where retail accounts for a significant portion of total revenue. Given that it has grown based on its brokerage competitiveness, the instability of its stock trading system could be detrimental to Kiwoom Securities. Last year, thanks to a surge in revenue from overseas stock brokerage commissions stemming from increased foreign stock transaction amounts, Kiwoom Securities re-entered the 1 trillion won operating profit club for the first time in three years.
In the market, there are remarks that this incident will serve as an opportunity to evaluate the crisis response capabilities of Director Kim Dong-jun, the second-generation owner who recently joined Kiwoom Securities as an internal director. On the 26th of last month, Kiwoom Securities held its 26th regular shareholders' meeting at its headquarters in TP Tower, Yeouido, Seoul, and newly appointed Director Kim, the eldest son of former chairman Kim Ik-rae, as an internal director.
Director Kim will hold concurrent positions as the head of Kiwoom Private Equity (PE) and Kiwoom Investment, thus only participating in board activities as a non-executive internal director at Kiwoom Securities. This is due to the concurrent position prohibition rule under the Financial Companies Governance Act. However, in the securities industry, the appointment of Director Kim is seen as the starting point for the second-generation management of DaouKiwoom Group.
Born in 1984, Director Kim graduated from the University of Southern California (USC) with a degree in accounting and obtained a Master of Business Administration (MBA) at Cornell University. As Kiwoom Securities aims to strengthen its overseas expansion, the role of Director Kim, an expert in the U.S. market, is expected to expand further.
A high-ranking official in the securities industry stated, "If Kiwoom Securities loses trust in the brokerage sector, the damage could be greater than that of any other securities company," adding, "Investors will keep a close eye on how sincerely Kiwoom Securities works on victim compensation and system stabilization."