Meritz Securities has become the ninth commercial paper operator in Korea. With Meritz Securities joining after Samsung Securities, the expansion of the commercial paper market and intensifying competition are expected to accelerate among major securities firms.
The Financial Services Commission announced on the 23rd that during its 16th regular meeting, it designated Meritz Securities as a comprehensive financial investment firm (speculative investment firm) with net capital exceeding 4 trillion won and approved its short-term financial business. As a result, Meritz Securities can now issue commercial paper up to 200% of its net capital for use in corporate financing and other purposes. The Financial Services Commission expressed expectations that with Meritz Securities joining, the number of speculative investment firms authorized to handle commercial paper has increased to nine, enabling better response to diverse corporate funding needs such as venture capital supply.
Commercial paper is a short-term financial product issued by securities firms based on their own credit, with a maturity of less than one year. Only securities firms that have received approval for short-term financial business from financial authorities among speculative investment firms with net capital of 4 trillion won or more are eligible to handle commercial paper. Securities firms can utilize funds raised through commercial paper for corporate financing, including corporate loans, corporate bonds, and equity investments.
The number of commercial paper operators has also increased rapidly. Previously, only four firms—Mirae Asset Securities, Korea Investment & Securities, NH Investment & Securities, and KB Securities—handled commercial paper business. However, Kiwoom Securities received approval in November last year, followed by Shinhan Investment Corp and Hana Securities in December. With Samsung Securities and Meritz Securities added this month, the total number of operators has reached nine.
Meritz Securities, with net capital exceeding 8 trillion won, has significant capacity for fund raising through commercial paper and is expected to influence market competition dynamics. By securing a new funding method—commercial paper—it has also laid the groundwork to expand its strengths accumulated in real estate financing into corporate financing and venture capital investments.
The scale of the commercial paper market is also growing rapidly. According to the Financial Services Commission, the amount raised through commercial paper increased from 15.6 trillion won at the end of 2020 to 54.4274 trillion won by the end of March this year—a more than threefold increase. With new operators continuously joining, the growth trend of the commercial paper market is expected to continue.
However, as the number of operators increases, the focus of competition is expected to shift from fund raising to asset management. This is because the government is strengthening the obligation for speculative investment firms to supply venture capital and lowering the limit on real estate asset management using commercial paper funds. The key to determining the future performance of major securities firms in their commercial paper businesses will be how many viable investment opportunities can be identified to channel increased fund-raising capacity into actual corporate financing and venture capital supply.
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