SEOUL, Feb.1 (Yonhap) – South Korea plans to introduce an omnibus account system for foreign traders to help boost their convenience in trading stocks on the Korean bourse, the financial regulator said Sunday.
The envisioned program is also expected to help get its stock market included on the Morgan Stanley Capital International (MSCI) advanced market index.
According to the Financial Services Commission (FSC), a global asset management firm or brokerage house can open a single account to receive trading orders from their clients and place them with a Korean securities company.
The orders are also to be settled through the single “omnibus account,” consolidating processing of orders and settlements from multiple clients, so as to reduce traders’ inconvenience and cut transaction costs.
Currently, trading orders and settlements of each fund have to be made separately even though funds are managed by a single entity. Offshore investors are also required to open separate accounts to make orders and settlements through a brokerage firm and custodian bank in Korea, complicating trading procedures.
“After amending relevant rules, we will launch the new system in May as a pilot program, and operate it fully next year,” said Kim Hak-soo, director general of the FSC’s Capital Markets Bureau.
It has been 24 years since the country revised the foreign investment management system in line with changing investment environments and practices.
The rigid ID-related regulations for foreigners have long been cited as one of the major reasons for the MSCI’s reluctance to put South Korea on the Developed Market (DM) index.
While the MSCI categorizes 78 countries into three benchmark indices — developed, emerging and frontier markets — it has maintained South Korea’s emerging market status since 2009, while dropping the nation from its review list of DM index candidates in 2014.
South Korea has been striving to have the local stock market back on the review list to ultimately be included in the top index group, hoping for the local market to trade in a stable fashion under the minimized effects of emerging market-related turmoil.