[2026 Growth Strategy] 24-Hour FX Market to Open in July... Accelerating Push for MSCI Developed Index Inclusion

Comprehensive Roadmap Unveiled for Developed Markets Index Inclusion
Pursuing Won Internationalization and Regulatory Reforms

The government will open the foreign exchange market 24 hours a day starting in July, launching efforts to internationalize the Korean won. By establishing an offshore won settlement system and revising related regulations, the government aims to accelerate Korea's inclusion in the Morgan Stanley Capital International (MSCI) Developed Markets Index-a long-standing aspiration for the Korean stock market and a key campaign pledge of President Lee Jaemyung.

On the afternoon of January 9, the Ministry of Economy and Finance, the Financial Services Commission, and other relevant agencies unveiled the "2026 Economic Growth Strategy" and, alongside it, announced a comprehensive "Roadmap for Foreign Exchange and Capital Market Reforms for MSCI Developed Markets Index Inclusion." The MSCI Developed Markets Index is highly significant, as it serves as a benchmark for asset allocation by global institutional investors, pension funds, and passive funds.

Despite the size of its stock market and the competitiveness of its companies, Korea is currently classified in the Emerging Markets (EM) Index, alongside Taiwan and India. In 2008, Korea was listed as a "watch list" candidate-a step prior to inclusion in the developed markets index-but failed to advance, and subsequent administrations have also been unsuccessful in their attempts. A government official emphasized, "Pursuing inclusion in the MSCI Developed Markets Index is a key task for fundamentally improving the structure of Korea's capital market and establishing a foundation for long-term, stable demand."

The newly released roadmap focuses on eight major areas: ▲Advancing the foreign exchange market ▲Establishing a global-standard securities trading and settlement system ▲Enhancing convenience in account opening ▲Rationalizing short-selling regulations ▲Improving English-language information disclosure ▲Removing restrictions on spot transfers and over-the-counter trading ▲Expanding advanced dividend procedures ▲Increasing the availability of investment products. The roadmap specifically targets six items that received a "needs improvement (-)" rating in last year's MSCI market accessibility assessment. If Korea is successfully placed on the watch list in June based on this roadmap, the scenario would be an announcement of developed market index inclusion in 2027 and actual implementation in 2028.

The first item in the roadmap is the 24-hour opening of the domestic foreign exchange market, a key demand from overseas investors. By extending the current system-which closes at 2 a.m.-to operate around the clock starting in July, the government aims to eliminate trading gaps for foreign investors. Kim Heejae, Director of the International Finance Division at the Ministry of Economy and Finance, described this as "the first step toward the internationalization of the won," adding, "The 2026 Economic Growth Strategy also includes a plan to release a 'roadmap for the internationalization of the won' by the first half of the year." In line with this, the government will establish guidelines for electronic foreign exchange trading (eFX) and improve banking practices, while also working to include the global benchmark exchange rate (WMR), which overseas investors commonly use for mark-to-market valuation of their assets.

Systems will also be established to allow foreign financial institutions to open won accounts in Korea and manage won assets directly, including the introduction of offshore won settlement institutions. A pilot program will begin in September, with full implementation planned for next year. The Bank of Korea will also build a new 24-hour settlement network (offshore won settlement network) so that won settlements between foreign institutions can take place at night. Additionally, the government will simplify the registration process for Registered Foreign Exchange Institutions (RFI) to encourage greater participation by foreign financial institutions. Currently, there are about 73 RFIs, but their trading volume accounts for only about 1%. Kim explained, "RFIs need to play a significant role in nighttime trading, so we are including improvements to registration and regulations to address this."

The government will also establish a securities trading and settlement system that meets global standards. Previously, MSCI rated Korea as "insufficient" because, although omnibus accounts can be used, settlements must still be conducted by the final investor ID. The government plans to shift from the current system-where settlement accounts are opened for each final investor-to an integrated management system at the asset management company or global custodian bank level, thereby improving the convenience of nominal accounts. A Financial Services Commission official stated, "Integrated accounts are key," adding, "We will change the real-name verification process for nominal accounts to global standards, which should encourage more inflows from overseas funds." The government also plans to allow even small and mid-sized foreign securities firms to use integrated accounts, enabling the participation of "global Donghak Ants" (retail investors). In addition, the government will upgrade infrastructure and regulations so that won obtained through same-day foreign exchange settlement (CLS) can be used for same-day securities settlement, and will promote temporary won overdrafts (OD) to prevent settlement failures.

In terms of investor registration and account opening, the government will implement an account identification system based on the Legal Entity Identifier (LEI), an international standard corporate ID used in global financial transactions. Until now, LEIs could only be issued for new accounts. Overseas investors who had previously invested in Korea used the IRC ID, which required pre-registration with the Financial Supervisory Service, but after this system was abolished in 2023, existing accounts could not be converted to LEI unless they were closed. The government will also simplify real-name verification procedures for foreign corporations by introducing an LEI issuance confirmation system and other measures.

The government also announced plans to rationalize short-selling regulations, which have been a concern for overseas investors. English-language disclosure, which has been gradually strengthened, will be further expanded. Regarding over-the-counter trading-which previously received an "insufficient" rating from MSCI-the government will prepare detailed guidelines for reporting methods and procedures within the first quarter and will expand the scope of post-reporting. To enable investors to make informed decisions about dividends, advanced dividend procedures will also be expanded. Currently, most Korean companies announce confirmed dividends after the ex-dividend date and do not provide dividend forecasts. The government will offer additional incentives to companies that amend their articles of incorporation to address this. In addition, to align access to Korean derivatives and other instruments with advanced market practices, the Korea Exchange will gradually open up index licensing. Following the listing of FTSE Korea Index futures on ICE Futures U.S. in February, trading hours for European and North American exchanges will be expanded within the first quarter.

A government official stated, "We will systematically check the progress of each improvement task at least once a quarter through a task force composed of relevant agencies, ensuring effective implementation and supporting a smooth transition. We will also actively communicate with MSCI and global investors to enhance the investor experience."