Overseas Financial Institutions to Gain Direct Access to Domestic Foreign Exchange Market Starting Year-End

From now on, foreign financial institutions located overseas will also be able to directly participate in the domestic foreign exchange market. The introduction of electronic foreign exchange brokerage will be promoted, providing real-time exchange rate information between financial institutions and customers.

On the 12th, the Ministry of Economy and Finance announced that it will give public notice of the partial amendment (draft) of the 'Foreign Exchange Transactions Act' and its Enforcement Decree in accordance with Article 41 of the 'Administrative Procedures Act.' This amendment was prepared to specify the key tasks of the 'Foreign Exchange Market Structure Improvement Plan' announced on February 7.

The core of the Enforcement Decree amendment is to open the way for overseas foreign financial institutions (RFI: Registered Foreign Institution) that meet certain requirements and are registered with the government to directly participate in the domestic foreign exchange market. The foreign exchange authorities plan to thoroughly monitor the market by grasping foreign financial institutions' foreign exchange transaction information through domestic foreign exchange brokerage companies.

Through the legal amendment, the introduction of 'customer-facing electronic foreign exchange brokerage services' will be promoted, which provide real-time exchange rate information, order reception, and transaction services between financial institutions and customers using electronic means. Accordingly, it is expected that the infrastructure of our foreign exchange market will be improved to a global level.

To raise awareness of unfair practices such as price manipulation in the foreign exchange market, provisions prohibiting market disruption activities will be separately established. Explicit grounds will also be provided in the Foreign Exchange Transactions Act to allow flexible and phased use of emergency measures (safeguards) such as imposing capital transaction permit obligations and transaction suspensions, which the government had to apply uniformly in urgent situations like wartime, according to market conditions, moving from 'recommendation → corrective order → emergency measures.'

The Ministry of Economy and Finance stated, "This amendment draft will be publicly notified from the 12th of this month until August 21, followed by review by the Ministry of Government Legislation, Deputy Prime Minister and Cabinet meetings, and the legal amendment bill will be submitted to the National Assembly in the third quarter of this year. The tasks included in the Enforcement Decree amendment are scheduled to be implemented from the fourth quarter."

[Image source=Yonhap News]