SEOUL, South Korea – In a significant move to bolster its standing as an attractive destination for offshore investors, South Korea’s finance ministry announced a series of measures aimed at better managing foreign exchange settlement risks. The government’s proactive approach seeks to create a more convenient environment for offshore investors while aligning with global standards for currency exchange.
Key Developments and Progress Towards Opening Onshore Dollar-Won Exchange Market
Following Vice Finance Minister Kim Byeong-hwan’s visit to London for meetings with foreign investors, the finance ministry unveiled its plans to address the concerns raised by offshore investors. Here are the key developments and actions taken:
Measures to Improve Access and Reduce Settlement Risks
The South Korean government is committed to enhancing access and reducing settlement risks for offshore investors. Key measures include:
- Announcement of New Measures: The government is set to announce a comprehensive set of measures later this month. These measures are a direct response to the requests made by foreign investors for more convenient currency exchange options.
- Alignment with Global Standards: Foreign investors emphasized the importance of managing settlement failure risks in accordance with global standards. South Korea acknowledges the need to align with diverse counterparties in different timezones to ensure smooth currency exchange operations.
- Addressing Currency Hedging Limitations: The issue of currency hedging limitations was also brought to the forefront. The government is actively working to address this concern and provide more flexibility for offshore investors.
Opening of Onshore Dollar-Won Exchange Market
South Korea is gearing up for a significant milestone in its financial landscape by opening its onshore dollar-won exchange market to foreigners. The following are the key details of this development:
- Timeline for Market Opening: The opening of the onshore dollar-won exchange market is scheduled to take place this year. Overseas institutions will be allowed direct participation starting from the first half of 2024.
- Extended Trading Hours: To accommodate global investors, extended trading hours will be introduced from the second half of the year. This move aims to facilitate smoother trading across different timezones.
- Progress on Market Participation: South Korea initiated the process of accepting applications from foreign institutions in October. As of now, five firms have successfully completed registration, showcasing strong interest from the global financial community. These firms include State Street Bank & Trust Company (SSBT) of Hong Kong, SSBT of London, HSBC Bank (Singapore), Credit Agricole CIB in Paris, and MUFG Bank in Tokyo.
- Anticipated Registrations: The momentum is expected to continue, with three to four more firms anticipated to register this month. This influx of registrations highlights the growing appeal of South Korea’s financial market among foreign investors.
Pilot Test of Extended Trading Hours
As a crucial step towards implementing extended trading hours, foreign exchange authorities are set to conduct their first pilot test of currency trading during extended hours. This test will take place on Tuesday, with trading hours extended from 6pm local time (0900 GMT) until 2am on Wednesday. This pilot test aims to iron out any operational challenges and ensure a seamless transition to the new trading hours.
Registered Foreign Institutions for Onshore Dollar-Won Exchange Market
| Financial Institution | Location |
|---|---|
| State Street Bank & Trust Company (SSBT) of Hong Kong | Hong Kong |
| SSBT of London | London |
| HSBC Bank (Singapore) | Singapore |
| Credit Agricole CIB in Paris | Paris |
| MUFG Bank in Tokyo | Tokyo |
This table provides a snapshot of the financial institutions that have completed registration for participation in South Korea’s onshore dollar-won exchange market. These institutions represent a diverse range of global financial hubs, underscoring the international interest in South Korea’s financial sector.
South Korea’s proactive measures to enhance access and reduce settlement risks for offshore investors demonstrate its commitment to fostering a thriving and globally competitive financial ecosystem. The imminent opening of the onshore dollar-won exchange market and the growing interest from foreign institutions signify South Korea’s emergence as a key player in the international financial arena. As the pilot test of extended trading hours gets underway, the nation is poised for a new era of financial growth and collaboration on the global stage.
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