CFTC unlocks futures link with Korean derivatives dealers

KRX exchange members will be able to deal KOSPI 200 futures directly with US customers. 

The US Commodity Futures Trading Commission (CFTC) will allow Korean dealers to directly trade with US investors without requiring them to register as a futures commission merchant (FCM).

The order to the Korean Exchange (KRX) permits certain exchange members to deal KRX derivatives such as its flagship KOSPI 200 futures directly with US customers.

According to a statement from the exchange, the ruling is expected to increase US activity in the Korean futures market, in which local banks will be able to “solicit and provide information and infrastructure to US investors.”

Prior to the announcement, US institutional investors had to open accounts with FCMs to trade Korean futures. However a lack of direct access had undermined US activity in the market. According to the exchange, while foreign investors made up 56.5% of KOSPI 200 futures transactions in 2015, the US share made just 0.66%.

Following the ruling, KRX plans to allow it’s the KOSPI 200 index options to become “legally accessible to US investors through relief by the Securities Exchange Commission (SEC).”

The exchange is looking to significantly boost its activity with both the US and Europe. In November last year, the European Commission granted equivalency to Korea, allowing European banks to clear transactions with the Korean CCP.

KRX also established “after hours” trading links with both Eurex and CME. 

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