FIG Derivatives Briefing - 16.08.03

The dedicated professionals of Financial Institutions Group related practice (FIG) at Yulchon LLC will be bringing you periodic briefings on developments in Korea and globally concerning derivatives and structured products. We welcome any queries and feedback on the contents of this Briefing and related topics.

Trade Repository Reporting Proposal Announced

Korean financial regulators announced on 5 July that the 'TR Working Group' comprising the Financial Supervisory Service (FSS), Korea Exchange and the Bank of Korea has prepared a 'TR Reporting Proposal' detailing the entities which will be obliged to submit reports and details on information to be included in the reports. According to the TR Reporting Proposal, OTC derivatives products such as interest rate swaps, currency swaps and total return swaps would be covered in addition to all exchanged-traded derivatives products such as KOSPI200 Futures. In addition, certain derivatives-linked securities such as equity linked securities (ELS) and derivatives linked securities (DLS) will also be subject to reporting. All traders registered in Korea including not only securities companies, banks and financial institutions but general corporates and individuals will be subject to such requirements.

Trade Repositories (TR) are being introduced as part of the global efforts to regulate OTC derivatives market following the announcement by the G20 at the Pittsburgh summit in 2009. TR is a financial market infrastructure that collects, manages, and analyzes data related to OTC transactions. In line with such global trend, the Financial Services Commission (FSC) and FSS announced plans to introduce TR in Korea on 17 June 2014 and formed a task force to conduct a thorough study related to TR from July to December, 2014. A special committee was formed in July 2015 to devise detailed qualification standards to be designated as TR based on the study results and the Korea Exchange was finally designated as a TR on 17 August 2015.

Korean government to announce relaxation of futures/options markets rules

The FSC is expected to announce measures to relax certain rules concerning futures/options markets with the objective of boosting the domestic futures/options markets. Expected measures under consideration include, reduction of basic deposit for futures/options trading from KRW30million, relax regulations on submission of ELW price quotes and exemption of transaction tax (0.3%) on derivative contract for...