Exchange to Promote Overseas Listing of Derivatives Based on Korea Bond Index
Official Contract in March Next Year... IPO Planned for the Second Half of the Year
On the 30th, the Korea Exchange announced that it signed a Memorandum of Understanding (MOU) on the 26th with global index providers MSCI (Morgan Stanley Capital International) and FTSE (Financial Times Stock Exchange) Russell to list Korean bond index-based derivatives on overseas exchanges.
Until now, the Korea Exchange had not permitted derivatives based on Korean bond indices calculated by overseas index providers to be listed on foreign exchanges due to concerns that liquidity in the domestic derivatives market might be drained.
The Korean bond index is an index composed of stocks listed on the Korea Exchange that account for more than 80% of the market capitalization. Representative Korean bond indices calculated by overseas index providers include the 'MSCI Korea Index' and the 'FTSE Korea Index.'
The Exchange decided to pursue this institutional reform as the competitiveness of the domestic derivatives market will be secured with the opening of the derivatives market night session in June next year.
If derivatives based on the Korean bond index are listed on overseas exchanges, global investors will be able to manage risks related to the Korean market regardless of time and place.
Additionally, enabling the use of the Korean bond index as a derivative product overseas is expected to lead to the launch of various linked products and an inflow of liquidity into the domestic stock market.
As foreign investors' access to the Korean market improves, secondary effects such as improved perception of the Korean market and positive evaluations from overseas index providers are also anticipated.
The Exchange plans to proceed with the work step-by-step, considering the impact of this institutional reform on the domestic market.
In March next year, a formal contract including detailed conditions such as the underlying indices to be used for derivative listings with MSCI and FTSE Russell and the selection of overseas exchanges where the products will be listed will be signed.
In the second half of next year, the Exchange will promote listing products first on overseas exchanges that do not overlap with the domestic derivatives market's daytime trading hours, and in 2026, it will review the timing for further opening regarding trading regions and hours.
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An Exchange official stated, "We plan to continue efforts to advance the Korean capital market and strengthen the competitiveness of the domestic derivatives market," adding, "We will promote the Exchange's efforts to enhance access to the Korean market to global investors through various channels."
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