1. Reasons for Amendment
For over 20 years, the Korean foreign exchange market has maintained a closed and restrictive structure with a focus on domestic financial institutions to prevent a repeat of the foreign exchange crisis and otherwise ensure stable and continued external soundness. As a result, the growth of the foreign exchange market has stagnated even as our economy grew to match that of developed countries. Rather, the ongoing view across all areas of society has been that the closed structure of the foreign exchange market causes prices to be determined by the influence of certain market participants, hinders the creation of new won-based profit models by Korean financial institutions, and otherwise undermines the stability of the domestic foreign exchange and financial markets and acts as a stumbling block to the development of the capital market and finance industry. Accordingly, this Amendment seeks to develop the financial sector to an extent fit for our developed economy by making institutional improvements that transition the Korean foreign exchange market to an open, competitive market structure. It also modifies the macroprudential system to enable the government to respond to market changes in a timely and appropriate manner according to the external soundness situation.
2. Major Provisions
1) Introduce progressive measures consisting of the steps “Recommendation → Corrective order → Action” to enable the government to respond flexibly according to the market situation even in the absence of wartime or other extreme circumstances.
2) Prescribe provisions concerning the authorization of customer-facing electronic foreign exchange brokerage service providers, who use electronic equipment, etc. to provide clients with real-time services such as exchange rate information from each financial institution, ordering, and transaction matching.
3) Prescribe sanctions to modify response measures regarding the prohibition of market abuse in response to the participation of foreign financial institutions in the domestic market.
