Non-financial entities, including export companies, will be allowed to make transactions through forex aggregators, a service which has until now been limited to financial firms, according to an announcement from the Finance Ministry on Friday.
The reform comes as part of the proposed revision to the Foreign Exchange Transactions Act, part of the Korean government's effort to make the local forex market meet the "global standards."
Under the reform, forex aggregators will provide brokerage services for non-banking customers, sharing information on exchange rates offered by different finance firms, while helping them with placing orders and making deals.
As of the present, Seoul Money Brokerage and Korea Money Brokerage provide the services for the FX spot trading to banks and securities firms, allowing real-time trading for interbank transactions.
Implementation of the new measure is expected to give customers the upper hand in forex trading as financial firms will likely offer better prices for foreign exchange rates to their customers, the Finance Ministry said.
“This will bring positive effects such as extending choice options for customers, improving the convenience in transactions and (creating) price competition between financial firms,” the Finance Ministry said.
The revision will also work to provide a more stabilized foreign exchange market.
Under the current law, the government could only take measures such as the temporary suspension of transactions or imposing obligations to sell in cases of extreme circumstances, such as in the event of a natural disaster or war.
But with the revision, the government can take on softer measures, cooperating with the private sector to respond to emergencies through making suggestions or mandating a submission of action plans from relevant market players.
The ban on foreign exchange price manipulation will be categorized into a separate clause to alert to acts of market disturbance as well.
The revision was passed at the Cabinet meeting held Friday. It will have to pass the National Assembly for enactment.
The reform follows the announcement of measures to improve the foreign exchange market made in February. Other changes include extending the foreign exchange market's operating hours to 2 a.m. and allowing offshore finance firms to participate in the local market.