S. Korea to open mini-sized derivatives market

South Korea will open a mini-sized futures and options market next week to offer investors wider choices for hedging and trading and revitalize the once-vibrant derivatives market, the main bourse operator said Tuesday.

The Korea Exchange currently operates the futures and options trading based on the KOSPI 200 index, a flagship index composed of the top 200 stocks by market capitalization.

Starting next week, the bourse operator will offer contracts for as little as 25 million won ($21,900) and 5 million won for KOSPI 200 futures and KOSPI 200 options, respectively, one-fifth of the minimum price for the current contracts.

The KRX expected the low-cost entry will attract more investors to the derivatives market to boost liquidity and improve the pricing mechanism.

"The mini derivatives products will facilitate arbitrage trades using price difference between underlying assets and derivatives, enabling more accurate trading for hedging," the bourse operator said.

The latest measure comes as the nation's derivatives market has suffered a sharp downfall in its trading volume since stricter regulations were adopted in 2011 to limit small speculators in response to calls to cool the highly speculative market. 

South Korea was the world's leading derivatives market in 2011, but it fell to 12th place last year as tight access rules have driven investors to other markets, including the United States and Japan, according to the KRX. (Yonhap)