SEJONG- South Korea hopes its push to reform currency trading will drive a large share of trading volumes from the non-deliverable forwards market to its spot currency market, a senior government official said on Tuesday.
The remarks made in an interview reflect the latest official thinking after historic market reforms kicked off this year to court foreign investors and get on global indexes, with steps such as longer trading hours and wider foreign participation.
“There is hedging demand but also those who just want to buy the won, they are forced to go to the NDF market,” Shin Joong-beom, director general of the finance ministry’s International Finance Bureau, told Reuters, referring to forex transactions.
“We hope to move a big chunk of the NDF (to the spot deliverable market).”
Foreign investors rely on the derivatives market known as the non-deliverable forwards to trade the won and manage their exposure to the currency offshore.
The onshore market now trades from 9 a.m. to 3:30 p.m. But from July, South Korea will extend trading hours to run from 9 a.m. to 2 a.m., covering London business hours.
The move will allow a broader range of global investors to participate in the interbank FX market.
Starting this year, the government also began allowing some foreign financial institutions to participate directly in the local interbank currency market.
