Foreign investors seeking to trade Korea-listed stocks and bonds will soon find the process easier following an update to the foreign exchange regulations in the country.

According to The Korea Times, this recent initiative, spearheaded by the Bank of Korea and other major financial institutions, aims to simplify FX trading for offshore investors. Additionally, it enhances accessibility to the Korean onshore capital markets.

Streamlining Securities Transactions

Foreign investors facing challenges settling FX transactions can utilize Korean won overdrafts, reducing the risk of settlement failures. Traditionally, reliance on local custodian banks for FX transactions led to complications due to time differences and complicated interbank transfer procedures.

However, the media publication reported that the new framework enables investors to select their preferred FX trading institution, offering reassurances during securities settlements.

To streamline securities transactions, investors can utilize International Central Securities Depository cash and custody accounts without the need for personal accounts. This move eliminates the inconvenience of exchanging Korean won twice and simplifies the overall process for foreign investors.

Strengthening Communication

Additionally, South Korea has updated the omnibus account system under the Capital Markets Act to streamline FX procedures. Foreign investors can conveniently exchange currencies, eliminating the need for separate representatives or individual cash accounts for each investment.

The Korean government has pledged to enhance communication with offshore investors to address uncertainties. Regulatory revisions in foreign exchange transactions are scheduled for the first quarter.

Last year, South Korea's FX market underwent a significant transformation by including offshore firms and extending trading hours. Previously limited to local financial institutions and overseas entities with branches in the country, the market opened its doors to registered foreign institutions (RFIs), including global banks and brokerage firms.

The South Korean Cabinet's recent approval of an amended enforcement decree for the Foreign Exchange Transaction Act signaled a shift in the nation's forex market dynamics. The revised regulations removed barriers restricting market participation, offering RFIs access to South Korea's forex market.

Amidst these changes, South Korea experienced a resurgence in Contracts for Difference (CFDs) trading following a period marred by a stock manipulation scandal. Domestic brokerage houses have reintroduced CFD trading, recognizing its potential to diversify revenue streams.