South Korea fines US brokerage $9.6 million for high-frequency trading

South Korea has fined Citadel Securities over 10 billion won ($8.1 million) for disrupting market order through high-frequency trading in the country.

The Securities and Futures Commission (SFC) under the government watchdog Financial Services Commission (FSC) on Thursday in a regular meeting said it decided to fine the company 11.9 billion won for violating the Capital Markets Act.

Through the Seoul branch of Merrill Lynch Securities, Citadel Securities from October 2017 to May 2018 disrupted market order using a combined 264 domestic stocks, the SFC said.

Citadel Securities is known for using high-frequency trading (HFT).

Also called systematic trading, HFT is an algorithmic trading technique in which a computer issues a massive number of orders in a short time.

High-speed exclusive lines and high-performance computers slash order processing time to under a thousandth of a second to allow the placement of hundreds to thousands of orders per second at ultra-high speed.

"After comprehensively considering the purpose of regulations on actions that disrupt market order, characteristics of the Korean stock market, and trading time, frequency and proportion, the opinions we gathered agreed that the trading pattern of Citadel Securities constituted an act of disrupting market order," the SFC said.

"We strongly believe our trading complied with both Korean laws and global norms. We disagree with the FSC’s decision relating to our trading activity more than five years ago and will be seeking to appeal the decision,” Citadel Securities said in a statement.

Write to Hyeong-Gyo Seo at seogyo@hankyung.com