[2] In a case where a financial investment business entity’s hedge trading conducted by trading underlying assets, such as stocks, in the market to control risks arising from trading derivatives, conforms to the hedge purpose in terms of time, quantity, and method, whether such trading can be deemed market price manipulation (negative in principle)

1. As to the tort liability against Defendant Vienna Paris Bank

A. Market price manipulation based on so-called linkage, such as the fluctuation or fixing of the market price of listed stocks or exchange-traded derivatives, which are underlying assets of derivatives, with an intention to earn, or cause a third party to earn, unfair profits from the trading of derivatives, is illegal as causing damage to investors by impeding the fair formation of prices in the financial investment instruments market, and as a result, undermining investors’ trust in the market. Here, the act of changing or fixing the market price refers to a transaction that is likely to cause an artificial change in the market price and trading volume, which is formed in the free competition market due to normal demand and supply, due to other factors not attributable to the market. Whether it constitutes such an act can be determined by comprehensively taking into account indirect factors such as the nature of the derivatives or securities linked thereto, the volume and volume of the concluded contract or securities issued, the trends of trading volume and trading volume, the economic rationality and fairness of the transaction, the degree of market share manipulation, the continuous management of closing prices, etc., and other factors leading to the management of the market price in the derivatives market (see, e.g., Supreme Court Decision 2009Da47, etc.

B. After finding the facts as indicated in its holding, the lower court rejected all the Plaintiff’s assertion that, in light of the following circumstances, the act of mass sale of the instant stocks constitutes a sale of stocks for delta hedging, which can be seen as a normal supply and demand due to market factors, Defendant Vienna Bank set or stable the market price of the instant stocks through it, and as a third party, unlawfully interfered with the fulfillment of the redemption condition of the instant stock-linked securities as a third party.

(1) The instant stock-linked securities have the nature of derivatives with the structure of determining the amount of redemption to be paid to investors at the time of maturity or fulfillment of redemption terms due to changes in the price of the instant stocks and the Hadice commonism, which are underlying assets.

(2) Defendant Vienna Bank had engaged in hedging transactions in accordance with the principle of deton hedging by not later than August 30, 2006, including, inter alia, the purchase of 1,804,040 shares of this case during three business days from August 28, 2006 to August 30, 2006, as a result of the purchase of 1,804,040 shares of this case as to the price of the shares of this case.

(3) The beginning price of the instant shares was determined as 16,100 won higher than the redemption price, 15,562.5 won, which was the closing price of the previous 15,800 won, and thus, there was a possibility that the redemption condition of the instant stock-linked securities would have been fulfilled due to the increase of stock price on the day. In that case, Defendant Vienna Bank was in need of selling 1,691,928 shares according to the delta value.

(4) Defendant Vienna Bank ordered 1,645,080 Won at least 350 won (15,562.50 won), the redemption price, and sold orders from 15,950 won to 16,600 won (15,60 won) which are the same or higher as the immediately preceding contract price, at the same time, to sell orders from 15,950 won to 16,600 won during the connection time period (9:0 to 14:50) on the base date of the instant case. This is the necessary volume near the necessary volume of disposal, and even its head does not appear to be an excessive price compared to the sales price at the Defendant Vienna Bank, which was in charge of hedge on the instant stock exchange-linked securities, together with the Defendant Vienna Bank. In particular, Defendant Vienna Bank was difficult to view that the immediately preceding Paris bank sold orders to sell more than 250 times the order of the instant case because it anticipated the stock price increase before the base date of the instant case.

(5) Defendant Vienna Bank’s act of selling stocks of this case during the single provisional trading period as of the instant base date seems to be a transaction for deton hedging for the following reasons.

① Since the shares of this case was formed at KRW 15,950 on the day, the closing price was likely to be determined above the redemption price. As such, Defendant Vienna Bank was in need of controlling the quantity of shares held in accordance with the deel value in that case, and selling approximately one million shares of this case, which were not yet disposed of in order to raise funds for repayment to investors, during the single provisional sale period.

② In light of the fact that Defendant Vienna Bank’s order to sell a total of 600,000 shares of the instant shares at the market price for three times from 14:57:03 to 14:58:04 on the base date of the instant case, Defendant Vienna Bank’s order to sell a considerable quantity of shares before the end of the 200,000 won on the day, Defendant Vienna Bank’s order to sell a considerable quantity of shares on the day before the end of the 20,000, and the order issued by the market price is an order for concluding a contract prior to the designated order, it is difficult to view it as an order

③ An order to sell KRW 14:58:32 and KRW 14:58:49 on the same day and KRW 15,600,00 per heading 14:58:49 on the same day by Defendant Vienna Bank, together with an order to sell KRW 600,000,000 at the market price prior to that order, where the closing price of the instant shares is at least 15,600 won and the redemption condition is fulfilled, the order to meet the redemption standard price, which is about KRW 1,00,000, the volume to be disposed of, and the heading price exceeds the redemption standard price.

④ The order to sell KRW 14:59:13 and KRW 14:59:21 on the same day and KRW 15,500 on the same day is determined as the closing price of the instant base date and the redemption conditions are fulfilled, the order to sell KRW 15,600,000 prior to the fulfillment of the redemption conditions seems to have been prepared to prepare for the conclusion of the contract in the order of time, in which the order to sell KRW 15,600,000 on the first day will be subordinate to the order of time.

(6) It is difficult to conclude that Defendant Vienna Bank was able to sell all the amount to be disposed of on September 1, 2006 or on the connection time zone as of the base date of the instant case in cases where the redemption conditions are met on the base date of the instant case. Even if such sale was made, it is difficult to conclude that the closing price of the instant shares was above the base date of redemption. Whether the condition of the stock-linked securities is met is determined by the closing price as of the base date of redemption, the most theoretically reasonable thing for the financial institution conducting the delab to conduct the hedging transaction immediately before the end of the base date of redemption. However, in the transaction reality, it is difficult to limit the liquidity of shares due to the limitation of the stock liquidity, and thus, it is difficult to deem that Defendant Vienna Bank was able to dispose of some amount in advance prior to the connection time zone as of September 1, 2006 or the connection time zone as of the instant base date of redemption to dispose of shares.

(7) Defendant Vienna Bank bears the burden of paying more principal and interest in the event that conditions are met on the redemption date of five times remaining until maturity even if the redemption of the stock-linked securities of this case was not made on the instant base date. The amount of annual cumulative profit and loss amount around the instant base date maintained a significant amount of profit and loss, and when the stock-linked securities of this case were repaid early, it is difficult to view that the closing price on the instant base date is intended to fix or stabilize the hedge price under the redemption price, in light of the fact that the stock-linked securities of this case can be repaid early.

C. Examining the records in light of the aforementioned legal principles, the above determination by the court below is just, and contrary to what is alleged in the grounds of appeal, there is no error in the misapprehension of the legal principles as to the character of the dedela hedging, requirements for the determination of market price or the necessity of emergency evacuation, omission of judgment as to whether the act of interference with market price and the fulfillment of conditions by a third party, or omission of judgment or failure to exhaust all necessary deliberations beyond the bounds of

2. As to the tort liability of Defendant New Young Securities Co., Ltd. (hereinafter “Defendant New Securities”)

According to the records, the Plaintiff alleged that Defendant New Young Securities failed to perform its duty to provide accurate information about the process in which the principal and interest was repaid from Defendant NonNF Paris Bank, and that this was not premised on the establishment of market price manipulation. However, the lower court did not err in violating the obligation to protect customers by citing the judgment of the first instance court, and did not separately decide on the Plaintiff’s assertion. However, Defendant New Young Young Securities cannot be said to have a duty to explain to investors the specific circumstances of the hedge transaction after the issuance of the instant stock price linked securities, and it cannot be said that Defendant New Young Securities is not in charge of hedge transaction related to the instant stock price linked securities, and the circumstance in which the Plaintiff was repaid with the principal and interest cannot be a ground for determining whether to suspend investment in the instant stock price linked securities. Therefore, the Plaintiff’s assertion in the grounds of appeal cannot be seen to have affected the conclusion of the judgment by omitting judgment.

3. Conclusion

Therefore, all appeals are dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Kim Chang-suk (Presiding Justice)