South Korea Aims to Shift Currency Trading Volumes from NDF to Spot Market
Reforming Currency Trading
South Korea is determined to reform its currency trading to redirect a substantial portion of trading volumes from the non-deliverable forwards (NDF) market to its spot currency market. An official from the finance ministry conveyed this goal and emphasized the significance of the ongoing market reforms in attracting foreign investors and gaining access to global indexes.
Challenges and Hopes
The move comes in response to the challenges faced by those looking to buy the won, who are currently compelled to resort to the NDF market. The government hopes to address this issue by transferring a significant portion of the NDF market to the spot deliverable market, offering a more accessible and efficient platform for foreign investors.
Market Reforms
The onshore market will soon extend its trading hours from 9 a.m. to 3:30 p.m., providing a broader window that aligns with London business hours. This step aims to enable a wider range of global investors to participate in the interbank FX market, fostering greater foreign participation and engagement.
Foreign Participation and Impact
Furthermore, the government has initiated measures to allow certain foreign financial institutions to directly partake in the local interbank currency market, with around 20 foreign firms expressing interest in the venture. These steps are expected to positively impact South Korea’s efforts to gain acceptance into benchmark developed market indexes, potentially attracting significant inflows into the country’s economy.
Global Recognition
South Korea’s pursuit of acceptance into the World Government Bond Index and MSCI’s league of developed market countries has been ongoing, with the recent market reforms expected to bolster these endeavors. The government is also in discussions with securities settlement house Euroclear to enhance foreign investors’ access to the won currency, further elevating South Korea’s global presence and recognition.
Future Prospects
The reforms are poised to uplift South Korea’s standing in the global financial landscape and pave the way for increased investments, ultimately contributing to the country’s economic growth and stability.
