South Korea has opened its doors to offshore firms, granting them access to its foreign exchange market. The Cabinet recently approved an amended enforcement decree for the Foreign Exchange Transaction Act, enabling the path forward towards the change. Effective from October 4, the revised regulations will break down barriers that previously restricted market participation to local financial institutions and overseas entities with branches in the country.

Instead, the new policy welcomes registered foreign institutions (RFIs), including global banks and esteemed brokerage houses. Oversight of these entities' activities will fall under the purview of the Bank of Korea, as stated by the finance ministry today (Monday).

Opening Doors to Global Firms

Under the revised regulations set to take effect on October 4, the forex market will no longer be an exclusive domain for local financial institutions or foreign entities with a physical presence within South Korea. Instead, it will open its doors to RFIs. This policy shift is expected to encourage participation from global banking giants and reputable brokerage firms, stimulating greater liquidity and diversity in the market.

Beyond the policy shift, South Korea is gearing up for a significant change in its forex market operations. Currently running for 6 1/2 hours from 9 am to 3:30 pm, the market is set to extend its trading hours to a remarkable 17 hours, closing at 2 am the following day. This expansion is expected to take place as early as the second half of 2024, following a six-month pilot run, Yonhap reported.

During a seminar held in February in Seoul, the Ministry of Economy and Finance, along with the Bank of Korea, unveiled the plan to welcome offshore firms into South Korea's forex markets. These measures aim to elevate the nation's status in the global financial arena. Previously, only 54 certified local financial institutions, including banks and securities firms, had access to the interbank forex market.

South Korea's CFDs Market Resurgence

Meanwhile, South Korea made a significant comeback in the world of Contracts for Difference (CFDs) trading this month, following a tumultuous period that saw a stock manipulation scandal costing $77 million. Most domestic brokerage houses are reintroducing CFDs trading as they recognize the potential to diversify their revenue streams. This decision comes after a temporary suspension of CFDs trading in April due to concerns surrounding stock manipulators exploiting market vulnerabilities.

In addition, the Bank of Korea has issued a compelling call for the cryptocurrency market to be subject to regulatory standards that parallel those governing traditional banks. In a recent report by Finance Magnates, the central bank not only underlined the potential risks tied to crypto trading but also warned that any financial turmoil arising from this sector could exert substantial harm on the real economy.