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Kiwoom Securities. (Photo by Yonhap News) |
[Alpha Biz= Paul Lee] Kiwoom Securities is facing growing investor anxiety as it has yet to identify the cause of a major IT failure that caused its stock trading to be inaccessible for two consecutive days, from March 3 to 4. Many investors are expressing their intent to switch to other brokerage firms on online stock communities.
According to the financial investment industry on Sunday, the cause of the trading outage at Kiwoom Securities is being attributed to its dependence on Daou Technology, which has raised concerns about the company's ability to respond to incidents and identify the root causes. This is why, from 10 AM on the 5th to 8 PM on the 6th, all services were suspended, and a full system review was initiated.
An industry insider who previously worked at Kiwoom Securities stated, "While Daou Technology is the parent company of Kiwoom Securities, it does not have control. Since the majority of Daou Technology's revenue comes from Kiwoom Securities, Kiwoom's staff tends to view Daou Technology as just an IT subcontractor."
Doubts about Daou Technology's IT capabilities are also growing. The industry believes the issues stem from Kiwoom Securities' proprietary automatic order routing (SOR) system, which was launched in response to the alternative exchange that opened last month. While competitors use SOR systems developed by Koscom or NextTrade, Kiwoom Securities uses its own system, which has led to the ongoing issues.
Although Daou Technology is known as an IT company, its IT system construction and management division accounted for just 3.79% of its total revenue last year. The majority of its revenue comes from its subsidiary, Kiwoom Securities, in which it holds a 42.31% stake. Based on revenue, Daou Technology is more of a financial company acting as a holding company within the Daou Kiwoom Group.
Daou Technology’s market capitalization is approximately 870 billion KRW, which is only 30% of Kiwoom Securities' 2.9 trillion KRW market value. Despite being part of a larger group, Daou Technology has not been receiving significant recognition in terms of its IT capabilities.
Kiwoom Securities grew rapidly into a major brokerage firm by offering an early and intuitive home trading system (HTS) with low trading commissions, which set it apart from competitors. It was once considered an icon of innovation in the securities industry, but now, it is being criticized for showing impatience toward latecomers. At Kiwoom Securities' annual general meeting on the 26th of last month, CEO Eom Joo-seong made a controversial remark, suggesting that the Toss Securities community resembled a "leading room" for investors.
The Financial Supervisory Service will decide whether to conduct an inspection after confirming the cause of the IT incident and the facts surrounding it.
Alphabiz Reporter Paul Lee(hoondork1977@alphabiz.co.kr)
