In the future, the opening hours of the domestic foreign exchange market will be significantly extended to 2:00 am the next day. In addition, foreign financial institutions will be able to participate in the domestic foreign exchange market.
Today (7th) the Ministry of Strategy and Finance and the Bank of Korea announced the ‘Foreign Exchange Market Structural Improvement Plan’.
■ The closing time of the domestic foreign exchange market is extended from 3:30 pm to 2:00 am the next day.
The government is promoting a plan to extend the closing time of the domestic foreign exchange market from 3:30 pm to 2:00 am the next day. The government plans to first extend the closing time of the London financial market until 2:00 a.m. Korean time, but later expand it to a 24-hour opening considering market conditions.
Global investment institutions calculate asset payments by currency at the exchange rate at 4:00 pm London time (1:00 am in Korea), but there is a difficulty as there is no exchange rate to apply to those was won. It is currently evaluated at 3:30 pm, the closing price of the Korean market, so the standard is different from other currencies.
The standard trading rate, the average market exchange rate, is calculated from 9:00 am to 3:30 pm no see.
■ Foreign financial institutions also participate in the foreign exchange market between domestic banks…Limited to banks and securities companies
The government has decided to promote a scheme for foreign financial institutions (RFIs) located abroad to participate in the foreign exchange market between domestic banks. Previously, only domestic financial institutions could participate.
The targets of participation are global banks and securities companies of the same type as domestic foreign exchange agencies, and foreign exchange specialist investment companies that do not fall under this category are not eligible to participate.
The foreign exchange exchange market as well as the spot exchange market, where transactions are made between the won and the dollar, will be opened to these foreign financial institutions. An FX swap is a short-term foreign currency fund transaction with a maturity of less than a year where a required currency is borrowed using surplus funds as collateral, and the principal is exchanged at the exchange rate at the time of the contract when it matures. It is a trading method used mainly by foreigners who invest in domestic securities to avoid the risk of exchange rate fluctuations.
Whether or not to open other foreign exchange derivatives, such as currency swaps (CRS) and currency options, will be decided later taking into account market conditions and trading demand.
As a requirement for authorization, it is necessary to ensure a sufficient level of transaction limit to conduct transactions with already participating institutions, and to open an account for a Korean settlement won at a domestic financial institution. We check whether corporate information, such as international standard IDs issued to corporations, and the regulations of foreign financial institutions and national supervisory authorities are at the same level as domestic ones.
In addition, you must have a commitment to fulfill your obligations, such as complying with legal obligations and cooperating in the submission of materials such as supervision.
In addition, Korean Won payment must go through a domestic foreign exchange brokerage firm approved by the authorities.
The government explained that even if the foreign exchange market is opened, the authorities’ trading monitoring and market control functions will remain at the same level as they are at present.
■ Introduce ‘foreign exchange electronic brokerage service for customers’… Administrative support such as allowing direct transactions with domestic financial institutions
In order to provide foreign financial institutions with the same e-transaction environment as domestic financial institutions, the government plans to introduce an ‘aggregator for foreign currency exchange for customers’, which is already common in the global market. Institutions participating in the interbank market that have pre-registered with the authorities as foreign exchange electronic brokerage services will be able to provide customer service through the registered institutions.
Within the allowed range, the transaction can be completed by checking the price through a messenger between the parties, and the bank can select a bank by submitting a quote in accordance with the customer’s request for a quote. It is also possible that the bank presents a quote to the customer, and after the customer confirms the quote, selects the bank and executes the transaction.
However, it is not possible to use an automatic streaming method that automatically closes a transaction at the best possible price without identifying the counterparty in advance.
In addition, measures were put in place to maintain the competitiveness of domestic financial institutions. In order to increase transactions by foreign financial institutions through domestic institutions, direct transactions between the head office and branches of the same group are allowed without going through a domestic authorized foreign exchange brokerage, and the obligation to report Korean loans obtained has been exclude
In addition, given the difficulty for foreign financial institutions to comply with domestic laws, domestic financial institutions within the same group are allowed to act as agents for reporting and reporting on foreign financial institutions. Foreign financial institutions that do not have domestic branches may entrust business to a leading bank, and will be exempt from reporting liabilities when borrowing from a leading bank.
The government decided to review supplementary measures for the foreign exchange soundness management system, such as the forward exchange position management system, to prevent the participation of foreign financial institutions from acting as a factor in market instability.
In addition, in a crisis, we decided to draw up effective supervisory measures, such as determining direct control measures for capital transactions by foreign financial institutions and establishing a cooperative system with local supervisory authorities.
■ “Individuals investing in foreign stock can exchange freely”…which will be implemented in the second half of next year
The government expects that through these measures, foreign investors will be more convenient in trading in won Korea, which will stimulate the investment of won assets and expand the overseas business of domestic financial institutions.
In addition, by stimulating platform and price competition between domestic and foreign financial institutions, the service quality and security of foreign exchange transactions are improved, and not only institutions but also individuals who invest in foreign assets can freely exchange money during foreign business hours.
The government intends to implement such measures to improve the structure of the foreign exchange market with the aim of implementing them in July next year at the earliest after revising laws and preparing banknotes.
The participation of foreign financial institutions in the domestic foreign exchange market and the institutionalization of foreign exchange electronic brokerage services are amendments to the Foreign Exchange Transactions Act, and the extension of opening hours is a matter of market self-regulation. The government intends to present an amendment to the Foreign Exchange Transactions Act to the National Assembly in the third quarter of this year after legislative notification.
[사진 출처 : 연합뉴스]