Government unveils foreign currency, capital markets road map aimed at MSCI developed-market upgrade
Overseas traders will be able to access the Korean won around the clock at real-time exchange rates from July 2026, under a sweeping overhaul of the foreign exchange regime as the government accelerates its push toward won internationalization and an upgrade to developed-market status.
The Finance Ministry on Friday unveiled a road map outlining core reforms across FX and capital markets aimed at securing developed market status from global index provider Morgan Stanley Capital International. The plan forms part of the government’s broader economic policy directions announced the same day.
South Korea entered MSCI’s emerging market index in 1992 and was placed on the watch list for developed market inclusion in 2008, only to be removed in 2014. Since then, successive governments have sought an upgrade, without success.
“Inclusion in the MSCI developed market index is an essential task for structurally upgrading Korea’s capital markets and building a stable, long-term investor base,” the Finance Ministry said. “We expect the upgrade to help attract longer-term foreign capital and reduce volatility in equity prices and crossborder flows.”
The road map targets six areas that MSCI currently rates as “insufficient,” including FX liberalization, investor registration, clearing and settlement, information flow and the availability of investment instruments. With many reforms slated for the first half of the year, the government tentatively aims for placement on MSCI’s watch list in June, a step that could pave the way for developed-market inclusion as early as 2027.
Trade won anytime, anywhere
Most significantly, Korea will begin operating its onshore FX market around the clock from July, extending trading from the current system that effectively shutters at 2 a.m. The shift is intended to close time-zone gaps and allow global investors to trade the won at real-time prices.
“This means real-time access to the won anytime and anywhere,” a Finance Ministry official said. “Outside market hours, banks currently quote conservative or proxy rates to manage their own risk. With 24-hour trading, institutions will be able to offer the best pricing to investors.”
To support round-the-clock trading, the government will also establish an offshore won settlement system that allows foreign financial institutions to settle transactions overnight and push to include the won in the World Market Refinitiv benchmark rate, a global reference exchange rate widely used by international investors — measures aimed at making the currency easier to price, settle and use globally.
The government also plans to lower barriers for overseas financial institutions by simplifying registration and reporting requirements. Under changes to the Registered Foreign Institution framework that take effect this month, newly registered foreign institutions will be able to begin trading immediately, with a three-month grace period before reporting obligations apply.
Easier entry, streamlined trading
A central element of the reform is the introduction of a fully functional omnibus account settlement structure. Trades to this point have largely been settled at the level of individual investors, limiting the usefulness of omnibus accounts. Under the revised system, global custodians will be allowed to manage settlement accounts on behalf of multiple funds, sharply reducing paperwork and identity checks that have slowed trading and settlement.
Regulators are also accelerating the transition to the Legal Entity Identifier-based investor identification system, replacing Korea’s legacy registration framework by converting existing accounts through backend upgrades at banks and brokerages without requiring investors to close or reopen accounts.
Post-trade processes will be streamlined through system upgrades that automate settlement workflows, reducing delays and operational risk, while restrictions on over-the-counter trades will be eased and post-trade reporting eligibility expanded to improve securities transferability and information flow.
Short selling, which MSCI upgraded to “moderate” from “insufficient” last year, will also see further regulatory refinements, as authorities move to ease rules that global investors have cited as overly stringent and complex.
More transparency, predictability
Korea is also accelerating the rollout of mandatory English-language disclosures for listed companies, a longstanding demand from foreign investors. The requirement, already in place for large Kospi-listed firms with assets of at least 10 trillion won ($6.9 billion) or 30 percent foreign ownership, was initially set to extend to all Kospi companies and major Kosdaq firms from 2028, but authorities are now reviewing moving the timeline forward to March 2027.
The government will also improve information flow by easing restrictions on off-market transactions and promoting more predictable dividend practices. Companies will be encouraged to determine and disclose dividends before the record date, rather than after the ex-dividend date, with incentives tied to disclosure and corporate value enhancement programs.
In addition, authorities will expand overseas access to Korean equity derivatives, including listing FTSE Korea index futures abroad and extending trading hours in major overseas markets.
jwc@heraldcorp.com
