Financial Regulatory Forum

S.Korea considers FX margin trading curbs -official

July 8, 2009

A South Korean bank clerk shows new 5,000-won ($4.93) bank notes at the headquarters of Woori Bank in Seoul    By Kim Yeon-hee and Lee Chang-ho
   SEOUL, July 8 (Reuters) – South Korea is considering imposing limits on currency margin trading to curb speculation, a senior official of the country’s financial authority said on Wednesday, a move that may dent brokerage houses’ efforts to expand into forex services.
   Margin trading allows investors to make leveraged bets on currencies and has grown increasingly popular in recent years among retail investors in South Korea and Japan.
   “We are considering a number of measures and will make an announcement soon,” the official told Reuters, asking not to be identified until a decision was made.
   Steps to be taken could include raising the amount of collateral investors must park with margin brokers from the current 2 percent.
   Margin trades involve leverage of around 100 times or more than the amount of collateral, leaving the forex market more speculative and exposed to deep swings.
   Currently, about 20 currencies are traded via margin trading in South Korea, with the yen <JPY=> and euro <EUR=> the most popular.
   In April, the Nikkei business daily reported that Japan’s Financial Services Agency was looking at limiting the maximum amount of leverage investors can employ for currency margin trading.
   Officials of futures trading firms are concerned about the upcoming curbs, saying they would limit their trading activity.
   But Chung Hae-geun, an executive managing director of Daewoo Securities, said the possible rules would bring forex margin trading into the regulatory boundary and help protect investors.
   South Korean brokerage companies, including Daewoo Securities <006800.KS> and Mirae Asset Securities <037620.KS>, have applied for licenses to offer forex margin and other futures trading, under a new capital markets law introduced in February.
   The won currency <KRW=> trimmed losses to close domestic trade at 1,273.50 against the dollar.
 (Additional reporting by Lee Soo-jung and Shin Jieun; Editing by Chris Lewis)
  ((yeonhee.kim@thomsonreuters.com; +82 2 3704 5646; Reuters Messaging: yeonhee.kim.reuters.com@reuters.net))
  ((If you have a query or comment on this story, send an email to newsfeedback.asia@thomsonreuters.com))
Keywords: KOREA FOREX/MEASURES 
   
Wednesday, 08 July 2009 08:29:26RTRS [nSEO103521] {C}ENDS

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