KRX seeks to enable trading of overseas ETFs in Korean exchange – Pulse News

Posted on September 23, 2019

[Photo by Korea Exchange]

South Korea’s sole securities exchange operator is seeking to list popular overseas exchange-traded funds (ETFs) in the local exchange amid Korean investors’ growing interest in direct trading of foreign securities, according to its chief executive.

Jung Ji-won, chief executive of Korea Exchange (KRX), announced during Global Exchange Traded Products (ETP) Conference on Friday that the exchange is seeking to allow Korean retail investors to trade highly-sought after overseas ETFs in the Korean market to meet with growing demand for foreign securities.

ETF refers to an exchange-traded fund that is a collection, or basket, of securities – stocks, bonds or mixed assets – but it can be traded in an exchange in real time when the market is open unlike a mutual fund. There are various types of ETFs including exchange-traded notes (ETN).

To make the trading of foreign ETFs that are currently listed in overseas markets such as the New York Stock Exchange available on the Korean market, the KRX and local asset managers are now working together to list a local portfolio manager’s ETF that invests in individual foreign ETFs on the local market so that Korean retail investors can sell and buy foreign ETFs via an ETF of ETF scheme. To enable it, the KRX aims to revise related regulations by the end of this year at the earliest, an unnamed official from the KRX said.

Recently, a growing number of Korean retail investors are actively seeking to directly invest into foreign securities including individual stocks, bonds or ETFs. But the direct trading of foreign ETFs is costly due to high commissions, and investors have to trade them only at night due to time difference. Currently, investors trading overseas funds must pay foreign exchange commission worth 5 Korean won ($0.004) to 10 won per $1, plus minimum 0.1 percent transaction fee.

If it becomes possible to trade overseas ETFs on the local market in ETF of ETF structure, Korean retail investors would be able to save cost and time, according to the KRX. The foreign ETF market is expected to meet with local retail investors’ growing demand for direct trading of individual foreign securities.

KRX also expects the ETF of ETF would further foster the growth of the local ETF market. Opened in 2002, the Korean ETF market has grown at a compound annual growth rate of 30 percent. In February, the net asset value of ETFs amounted to a record 45 trillion won.

By Chung Seung-hwan and Lee Eun-joo