It has been one year since the trading hours of the onshore dollar-won foreign exchange (FX) market were extended to 2 a.m. the following day, with the aim of enhancing convenience for both domestic and foreign investors in FX transactions*. At this point, the Ministry of Economy and Finance and the Bank of Korea evaluated the operational performance over the past year and announced further steps to ensure system stability, along with the results of the selection of the leading Registered Financial Institutions (RFIs).
* (Case 1) Exporting and importing companies can conduct timely FX transactions at real-time market rates that immediately reflect key economic indicators, such as U.S. GDP growth and inflation, that are typically released overnight.
* (Case 2) Domestic investors can convert currency at real-time market rates, rather than temporary indicative rates set by securities firms, when investing in overseas capital markets such as those in the U.S. during nighttime hours.
[Evaluation of System Performance]
Since January last year, the FX authorities have implemented FX market reform measures, including (1) allowing foreign financial institutions to participate in the Korean FX market, and (2) extending trading hours from 9:00 a.m.-3:30 p.m. to 2:00 a.m. the following day* starting from July 1st. To date, a total of 52 foreign financial institutions have registered as RFIs and are participating in the Korean FX market. Transactions and settlements by these institutions have processed smoothly throughout the entire process.
* The extended trading hours fully cover those of the London financial market, one of the world’s major financial hubs.
* Registered Foreign Institution (RFI): A foreign financial institution located overseas that meets the eligibility requirements prescribed under the Foreign Exchange Transactions Act and is registered with the FX authorities to directly participate in Korea’s FX market.
Since the extension of trading hours, the average daily spot FX trading volume in Korea’s FX market (from July 2024 to June 2025) reached $12.31 billion, marking a 16.3% increase (+$1.73 billion) compared to the same period a year earlier, and a 44.6% increase (+$3.79 billion) compared to the five-year average from 2019 to 2023, indicating a steady expansion in market scale. In particular, as the effects of the institutional reforms gradually take hold, the trading volume in the first half of 2025 showed a notable improvement compared to the second half of 2024. Trading during the extended hours (3:30 p.m. - 2:00 a.m. the following day) averaged $2.22 billion per day, accounting for approximately 18% of the total daily volume which demonstrates continued growth in trading activity.
[Additional Improvement Measures]
As part of efforts to sustain the growth and expansion momentum of Korea’s FX market, the FX authorities plan to implement the following follow-up measures aimed at further stabilizing the RFI system and promoting active trading during the extended hours.
First, the minimum threshold for RFIs is clearly established at an average annual trading volume of $100 million over the previous three years. While existing regulations stipulate that RFIs must maintain a certain level of trading activity to retain their registration status, no specific threshold had been set thus far, considering the early stage of the RFI system. Now that the institutional foundation has been successfully strengthened, this clear standard is being introduced to encourage active participation by RFIs in the market. When calculating trading performance, not only interbank market transactions but also direct transactions* will be taken into account, with the latter weighted at 50%. Assessments will be conducted on a three-year cycle, with the requirement to be applied starting from 2026 trading data so as not to discourage early participation in the market.
* In consideration of the initial challenges foreign financial institutions face in establishing credit lines, as well as the
need to improve operational efficiency within affiliated entities.
Second, the reporting obligation of RFIs to the Bank of Korea’s Foreign Exchange Information System (FEIS) will be further deferred by six months, from the end of June to the end of December this year. This decision* reflects requests from multiple institutions, given that connecting to the Bank of Korea’s system, developing internal reporting systems, and completing internal approval processes require a certain amount of time; additional feedback and familiarization processes are also needed, especially for foreign financial institutions that are not yet accustomed to Korea’s reporting infrastructure.
* A prior notice regarding the six-month extension of the reporting grace period was provided to RFIs and their reporting agents in late June.
Third, the government is steadily advancing the introduction of the aggregator system to enhance currency exchange convenience for foreign investors, as well as domestic and overseas corporations and institutions. In March, the amendment to the Foreign Exchange Transactions Act was passed, and the new system is scheduled to take effect on September 19. With the aim of launching full-scale services next year, the government plans to proceed step by step with the amendment of subordinate regulations* and the authorization process, through consultations with relevant institutions and industry stakeholders. Furthermore, the government will continue to foster an environment that enables onshore financial institutions (including branches of foreign banks) to conduct electronic foreign exchange (eFX) trading through automated algorithms, even during overnight hours or when human dealers are unavailable, provided that appropriate internal control mechanisms are in place.
* A draft amendment to the Enforcement Decree of the Foreign Exchange Transactions Act is currently under legislative review (May 29 – July 8), and subsequent revisions to the Foreign Exchange Transactions Regulations are planned.
[Leading RFI Selection Results]
In accordance with the “Introduction of Leading RFIs” announced in March, the FX authorities evaluated the past year’s (July 2024 – June 2025) performance of RFIs currently participating in Korea’s FX market. The assessment covered bidirectional spot FX transactions, quote-based spot FX transactions, and FX swap transactions. Based on their outstanding performance, the following five institutions have been selected as the 2025 Leading RFIs (in alphabetical order):
1. Deutsche Bank AG, London Branch
2. KEB Hana Bank, London Branch
3. Standard Chartered Bank, London Head Office
4. State Street Bank and Trust Company, Hong Kong Branch
5. State Street Bank and Trust Company, London Branch
While the original plan announced in March envisioned the selection of three institutions, the number was increased to five in light of the selected institutions’ active participation in both spot FX and FX swap transactions, and their overall contribution to invigorating the market.
The FX authorities plan to establish a regular consultation channel with the selected Leading RFIs, which will serve as a platform for monitoring market conditions and facilitating dialogue on institutional improvements. In addition to the previously announced incentives – such as exemption from disciplinary action for certain reporting violations once per year and commendations awarded by the Ministry of Economy and Finance to institutions or individuals – the authorities will also explore additional measures to further promote active participation.
These follow-up measures are expected to significantly reinforce the effectiveness of the RFI system and further stimulate trading during extended hours. Going forward, the Ministry of Economy and Finance and the Bank of Korea will continue to work closely with market participants to expand both the breadth and depth of Korea’s FX market, while actively devising additional institutional improvements, including measures to enhance foreign investors’ access to the domestic capital market.
Please refer to the attached files.
