Foreign exchange trading hours in Korea to be extended to 2 a.m.

Korea will extend foreign exchange trading hours as part of the effort to improve the country’s financial markets.

Employees at Hana Bank in central Seoul process transactions in a dealing room in August. [YONHAP]

Korea will extend foreign exchange trading hours as part of the effort to improve the country’s financial markets.

The operating hours of foreign exchange market will be extended to 2 a.m., and ultimately to 24 hours a day, according to the Bank of Korea and the Ministry of Economy and Finance on Monday.

The market currently runs from 9 a.m. to 3:30 p.m.

“We concluded the need to operate until the London market closes,” said Song Dae-keun, director of the Bank of Korea’s Foreign Exchange Business Division at a press briefing in central Seoul.

The extended hours is one of the three measures the financial authorities plan in order to upgrade Korea’s financial market.

“Korea has strived to advance the financial market even before the 2008 financial crisis, but progress has been slowed due to the volatility. We’re retrying to advance the market,” he said.

The change is expected to diversify the customer base at local financial institutions, which are largely focused on serving domestic customers due to the restrictions on trading times, the bank said.

The financial authorities plan to allow registered foreign institutions to directly take part in the wholesale foreign exchange market as early as next year.

Non-resident financial institutions are only allowed to participate in Korea’s retail foreign exchange trading as clients of domestic firms. This makes transactions for overseas investors inconvenient and costlier due to the commission.

To be an approved registered foreign institutions, they need a legal entity identifier, a reference code used to identify a legally entity engaged in a financial transaction, and a sufficient credit line that enables normal operations.

Only financial firms that share the same characteristics of local companies running the foreign exchange trading will be able to become registered foreign institutions. This means hedge funds will be excluded.

The financial authorities plan to survey the demand of offshore financial institutions that want to be registered before testing the operation next year. Operation is scheduled to start in the second half of next year after monitoring the changes.

The changes are expected to “raise transaction volume of the currency and attract diverse market participants, which are expected to stabilize volatility in the foreign exchange market,” Song said.

The central bank also expects the change to help Korea to be included in the Morgan Stanley Capital International (MSCI) developed market index.

The financial authorities have announced a set of measures to relax regulations related to the country’s financial markets, including scrapping registration requirements for foreign investors to trade in Korean stocks.

BY JIN MIN-JI [jin.minji@joongang.co.kr]