[E-Daily Reporter KWON HYE-ME ] As the domestic stock market continues its downward trend, the value of stocks forcibly liquidated due to retail investors’ failure to repay margin loans to brokerage firms has surged to the 30 billion won range.

According to Yonhap News on the 11th, outstanding balances from commission-based trading stood at 1.1051 trillion won as of the 9th, an increase of approximately 200 billion won from the previous trading day, the 6th (906.6 billion won).

Outstanding balances from commission-based trading refer to amounts investors owe securities firms for stocks purchased but not yet settled by the settlement date. On the 9th, stocks worth 37.9 billion won were forcibly liquidated through forced sales because investors failed to settle these balances by the settlement date (T+2), more than five times the amount from the previous trading day, the 6th (7 billion won).

This is the largest amount since the 19th of last month (54.2 billion won). The proportion of forced liquidations relative to the total outstanding balances also reached 4.2%, more than five times the previous session’s figure (0.8%).

Under the current system, if margin debt remains unpaid, shares are forcibly liquidated at the opening of the market on the settlement date. This suggests that the sharp decline in the KOSPI—which fell 5.28% on the 5th and 6.02% on the 6th—led to a flood of selling pressure early in the session on the 9th.

On the 9th, the outstanding balance of margin loans—an indicator of “debt-fueled investing”—stood at 28.0705 trillion won, a decrease of 315.2 billion won from the previous trading day (28.3856 trillion won). The balance, which was 29.216 trillion won on the 2nd of this month, fell by 1.1455 trillion won in just five trading days.

The balance of margin loans typically increases when stock prices rise, but it is interpreted that investor sentiment has weakened as market volatility has increased—reflected in the KOSPI’s recent three-day losing streak.

Investor deposits—which represent idle funds in the stock market—also fell to 88.254 trillion won, down 2.0802 trillion won from the previous trading day, marking the lowest level in four trading days since the 3rd.

To alleviate concerns over a surge in forced liquidations resulting from the sharp stock market decline, the Financial Supervisory Service temporarily exempted securities firms from the requirement to maintain a collateral coverage ratio of at least 140% for margin loans, effective from the 9th through January 31 of next year.

Under current financial investment business regulations, securities firms must secure collateral worth at least 140% of the loan amount when providing margin loans to investors. If the collateral maintenance ratio subsequently falls below the level set by the securities firm, the firm must immediately request additional collateral from the investor.

This measure is implemented by the FSS issuing a “no-action letter” to waive the obligation to maintain this collateral ratio. Consequently, securities firms will be able to flexibly determine their collateral maintenance ratios based on factors such as borrowers and market conditions. The aim is to alleviate the burden of forced liquidation resulting from a decline in the collateral ratio during a sharp stock market downturn.