Approval of the Amendment to the Foreign Exchange Transactions Act Enforcement Decree at the Cabinet Meeting on the 25th
From next month, foreign banks and securities firms will be allowed to participate in the domestic foreign exchange market. On the 25th, the government reviewed and approved the partial amendment to the Enforcement Decree of the Foreign Exchange Transactions Act, deciding to start the registration process for opening the domestic foreign exchange market from October 2.
On the 25th, the government announced that it had approved the partial amendment to the Enforcement Decree of the Foreign Exchange Transactions Act at the Cabinet meeting. This amendment was prepared to support the core tasks of the "Foreign Exchange Market Structural Improvement Plan" announced last February. The plan allows foreign financial institutions (RFIs) located overseas and authorized by the government to participate in the domestic foreign exchange market.
On the 21st, when the U.S. central bank Federal Reserve (Fed) held the base interest rate steady, employees were working in the dealing room at the Hana Bank headquarters in Jung-gu, Seoul. On that day, the KOSPI opened at 2,544.81, down 4.93 points (0.58%) from the previous session, and the won-dollar exchange rate started at 1,332.5 won, up 2.4 won from the previous trading day. Photo by Jo Yongjun jun21@
Currently, only domestic banks and foreign banks' domestic branches can participate, but this has been significantly expanded to include foreign banks and securities firms. Additionally, to avoid inconvenience in overseas transactions, the domestic foreign exchange market's opening hours will be extended until 2 a.m., the closing time of the London financial market. The amendment will be promulgated on the 4th of next month and will take effect immediately upon promulgation.
The government explained that the scope and requirements for foreign financial institutions eligible to participate in the domestic foreign exchange market are included in the Enforcement Decree. Following the amendment, foreign banks and securities firms will be able to participate in the foreign exchange market. However, hedge funds and foreign exchange specialized investment companies are not allowed to participate. A Ministry of Economy and Finance official explained, "Only banks and securities firms among domestic financial institutions are allowed to participate in the foreign exchange market."
Foreign financial institutions directly participating in the domestic foreign exchange market will be subject to legal obligations such as prohibition of violations of sound foreign exchange transaction order and reporting of major information, just like existing foreign exchange market participants. The government can monitor, through the Bank of Korea, whether these institutions comply with the order and obligations of the domestic foreign exchange market while conducting transactions.
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