Open Decision Ledger · Capital markets & finance
Whether Delta-Hedge Mass Sales on the Redemption Reference Date of Equity-Linked Securities Constitute Linked Market Manipulation
Translated from the Korean original. Read the Korean
Supreme Court, Mar. 10, 2016, 2013Da7264 (judgment)
No holding summary · checked against points at issue. The official text publishes no summary of the holding for this decision. The quotation and factors in this record are copied verbatim from the points at issue; the evidence for each axis is taken from the points at issue, the order and the reasons.
Case name: 손해배상(기)
Official text on the National Law Information Center
Question
Does a delta-hedge transaction in which a financial investment business operator mass-sells underlying stocks immediately before the market closes on the redemption reference date of equity-linked securities constitute linked market manipulation that fixes the market price?
Holding
A hedge transaction is recognized as economically rational if, in terms of timing, quantity, method, and the like, it is consistent with the hedging purpose. Accordingly, even if it affected the market price of the underlying asset, it is not regarded as market manipulation absent special circumstances such as artificial price manipulation intended to affect the contract terms, and the court below's determination was affirmed.
Points at issue, verbatim
금융투자업자가 파생상품 거래에 따른 위험을 관리하기 위하여 시장에서 주식 등 기초자산을 매매하는 방식으로 수행하는 헤지(hedge)거래가 시기, 수량 및 방법 등의 면에서 헤지 목적에 부합하는 경우, 이를 시세조종행위라고 할 수 있는지 여부(원칙적 소극)
Unofficial English translation
Whether a hedge transaction carried out by an investment business entity in the manner of buying and selling shares or other underlying assets in the market in order to manage the risks arising from derivatives transactions may be regarded as market manipulation where it conforms to the purpose of hedging in terms of timing, quantity, method, etc. (in principle, negative)
Disposition
Dismissed Stated in the decision
상고를 모두 기각한다.
Unofficial English translation
All appeals are dismissed.
Form of the test
Elements stated Stated in the decision
파생상품의 계약 조건에 영향을 줄 목적으로 인위적으로 가격을 조작하는 등 거래의 공정성이 훼손되었다고 볼만한 특별한 사정이 없는 한 이를 시세조종행위라고 할 수는 없다
Unofficial English translation
unless there are special circumstances under which the fairness of transactions may be regarded as having been impaired, such as artificially manipulating the price for the purpose of affecting the terms and conditions of a derivatives contract, it cannot be regarded as market manipulation
Factors
- 파생상품의 기초자산인 상장증권이나 장내파생상품의 시세를 변동 또는 고정시키는 등의 이른바 연계에 의한 시세조종행위
- 파생상품 거래에 따른 위험을 관리하기 위하여
- 시기, 수량 및 방법 등의 면에서 헤지 목적에 부합하는 경우
Unofficial English translation
• a so-called market manipulation by linkage, such as changing or fixing, etc. the market price of listed securities or exchange-traded derivatives, which are the underlying assets of derivatives
• in order to manage the risks arising from derivatives transactions
• where it conforms to the purpose of hedging in terms of timing, quantity, method, etc.
Relation to precedent
Follows earlier decisions Stated in the decision
대법원 2010. 7. 22. 선고 2009다40547 판결
Unofficial English translation
Supreme Court Decision 2009Da40547 decided July 22, 2010
Decisions referred to
[1] 대법원 2010. 7. 22. 선고 2009다40547 판결(공2010하, 1639)
Burden of proof
Not addressed Not in the decision
Open question and revisit condition
In a transaction bearing the outward form of a hedging purpose, under what combination of circumstantial facts are special circumstances sufficient to find that the fairness of the transaction was impaired recognized?
If the provisions of the Financial Investment Services and Capital Markets Act concerning hedge transactions and linked market manipulation are amended, or if the Supreme Court newly sets out the standard for impairment of the fairness of hedge transactions, this reading will be re-examined.
Cross-family AI independent reading & axis check
7 of 8 axes matched GPT-6 Astra (OpenAI, codex CLI) · 2026-10-16
A comparison with an independent reading by another AI family (GPT-6 Astra), which read only the original text without seeing the initial reading, showed agreement on 7 of the 8 axes, with the readings diverging on the fourth axis (Form of the test).
Axis 4 (Form of the test): Primary “Elements stated” vs Independent “Circumstances weighed”
Because the Holdings address not only the meaning of and the criteria for determining market manipulation but also the conditions for its in-principle exclusion when the transaction is consistent with a hedging purpose, the decision can be read as Circumstances weighed if the entire decision-making process is emphasized, and as Elements stated if the exclusion conditions are emphasized.
‘시세를 변동 또는 고정시키는 행위’의 의미와 판단 기준Raw responses and comparison record: Protocol · Blind readings (JSONL) · Axis comparison (JSONL) · SHA-256 (JSON)
Lower-court contrast & scope of application
Lower-court reading vs. Supreme Court holding
Lower-court context: The court below (Seoul High Court, 2011Na102884) regarded Defendant 1 bank's mass sale of stocks on the redemption reference date as trading of stocks for delta hedging that could be seen as ordinary demand and supply driven by market factors, and rejected the plaintiff's assertion that it fixed or stabilized the market price and that, as a third party, it unlawfully obstructed fulfillment of the redemption conditions. As for Defendant 2 securities company, it affirmed the judgment of the court of first instance, holding only that there was no violation of the duty to protect customers since there was no market manipulation, and did not separately address the assertion of breach of the duty to provide information.
Supreme Court standard: The Supreme Court, having regard to the standard for determining linked market manipulation and to the legal principle that hedge transactions in principle do not fall within it, held the court below's determination as to Defendant 1 bank to be correct. As to the portion concerning Defendant 2 securities company, the Supreme Court acknowledged the court below's failure to address the issue, but held that there was no duty to explain the specific circumstances of the post-issuance hedge transactions, that those circumstances could not in any event constitute grounds for deciding whether to discontinue the investment, and that the plaintiff's assertions would evidently be rejected, and therefore that this had no effect on the outcome of the judgment; it accordingly dismissed the final appeal in full.
Distinguishing conditions
- Where the quantity of the hedge transaction exceeds the quantity that must be disposed of according to the delta value, or where the quoted prices presented were excessively low compared to other institutions responsible for hedging
- Where it is confirmed that the hedging party has a clear profit from the failure of the redemption and therefore has an incentive to fix the closing price on the redemption reference date below the redemption reference price
- Where circumstances of artificial price manipulation, such as fictitious orders, wash sales, or continuous management of the closing price, appear in the Records
Record verification notes
Before asserting the same conclusion, one must first check whether the timing and quantity of the sell orders in question and the quoted prices matched the delta-hedge principle and the actual holdings, and whether the structure was such that the failure of the redemption conditions would be economically advantageous to the hedging party.
From the official text
Points at issue
[1] 파생상품의 매매 등에서 부당한 이익을 얻거나 제3자에게 부당한 이익을 얻게 할 목적으로 파생상품의 기초자산인 상장증권이나 장내파생상품의 시세를 변동 또는 고정시키는 등의 이른바 연계에 의한 시세조종행위가 위법한지 여부(적극) 및 여기서 ‘시세를 변동 또는 고정시키는 행위’의 의미와 판단 기준 [2] 금융투자업자가 파생상품 거래에 따른 위험을 관리하기 위하여 시장에서 주식 등 기초자산을 매매하는 방식으로 수행하는 헤지(hedge)거래가 시기, 수량 및 방법 등의 면에서 헤지 목적에 부합하는 경우, 이를 시세조종행위라고 할 수 있는지 여부(원칙적 소극)
Unofficial English translation
[1] Whether it is unlawful (affirmative) for a so-called market manipulation by linkage, namely, with the purpose of obtaining an unfair profit in transactions in derivatives or enabling a third party to obtain an unfair profit by changing or fixing, etc. the market price of listed securities or exchange-traded derivatives, which are the underlying assets of derivatives, and the meaning and criteria for determining an 'act of changing or fixing the market price' in this regard [2] Whether a hedge transaction carried out by an investment business entity in the manner of buying and selling shares or other underlying assets in the market in order to manage the risks arising from derivatives transactions may be regarded as market manipulation where it conforms to the purpose of hedging in terms of timing, quantity, method, etc. (in principle, negative)
Summary of the holding
The official text publishes no summary of the holding for this decision. The quotation and factors in this record are copied verbatim from the points at issue; the evidence for each axis is taken from the points at issue, the order and the reasons.
Order
상고를 모두 기각한다. 상고비용은 원고가 부담한다.
Unofficial English translation
All appeals are dismissed. The plaintiff shall bear the costs of the final appeal.
Provisions referred to
[1] 구 증권거래법(2007. 8. 3. 법률 제8635호 자본시장과 금융투자업에 관한 법률 부칙 제2조로 폐지) 제188조의4 [2] 구 증권거래법(2007. 8. 3. 법률 제8635호 자본시장과 금융투자업에 관한 법률 부칙 제2조로 폐지) 제188조의4
Read 2026-10-16 · Cross-read 2026-10-16. All quotes matched against the official text. The Chinese-character placeholders the court used for anonymised parties are given in their Korean readings, and parenthetical Chinese-character glosses are omitted.
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