Best Forex Brokers in South Korea

A brief history of Forex Trading in Korea

There have been various currencies in the Korean peninsula since the first time that the jurisdiction was unified under a sole government. The Korean Won was introduced in 1902 when the Korean Empire was the ruling party in the peninsula but it was also adopted post-World War II after the country was founded.  Metallic tokens were the first currency to be adopted by the country around 300 years BC. At about 996 AD, the first coin currency was introduced under the Goryeo dynasty but this was later reversed by the Joseon dynasty. The latter overthrew the previous dynasty and established the use of paper notes that would be printed on mulberry bark. It is thought that the word ‘Won’ was derived from Yuan and Yen after the Japanese invaded the country in the first world war.

After World War II, the country was split into two jurisdictions including North Korea under a communist government and South Korea, which was ruled by a democratic system. In 1945, the Won was once again introduced in S. Korea, and the Bank of Korea was made the central bank of the country. Due to inflation, the Won was replaced by the Hwan in 1963, albeit briefly. The Won was later re-introduced in the 1980s and was debugged from the dollar and replaced by the use of various global currencies. This would work to help the country to widen its trading opportunities around the world. At the end of the 90’s the South Korean government allowed the ₩ to be a free-floating currency.

Regulation of forex brokers and Requirements in South Korea

Several regulations govern forex transactions in the country. For example, the Electronic Financial Transaction Act was designed to regulate any electronic financial transactions in Korea. This act has several provisions that highlight the rights of parties in an electronic transaction, provisions to ensure the safety of the people transacting, and registrations of electronic businesses that deal in finance. This also applies to forex trading where forex traders can change currencies through the use of these electronic platforms. What else is considered an electronic financial business? You may be wondering.

The act provides that any business which issues or manages electronic currency, electronic funds services, electronic debt payment services, payment settlement services, depository services management of electronic payment services, and any other financial intermediaries that work between the payor and the payee. Companies that do not conduct their financial businesses electronically, they are still required to seek approval from the relevant authorities. These include companies in the banking system or those that offer credit services to retail clients. As a rule of thumb, the purchasing and selling of listed securities in the country is not permitted unless it is allowed by the relevant authorities. This includes the Financial Services Commission or the Financial Supervisory Service.

Several regulations have also been recently instituted to help curb financial volatility in the South Korean financial markets. This was made in a move to smoothen the flow of capital that was volatile due to short-term borrowing of foreign currency. In South Korea, brokers and insurance companies were allowed to carry out interbank currency trading. The regulations also allow forex brokers to make over-the-counter (OTC) derivative trades. To help streamline the trading of currency further, the country also revoked the rule that barred cross-border transactions. Previously, the only way to make a cross-border transaction was through seeking permission from the relevant authorities, With this abolished in 2005, forex traders could now easily trade currencies without having to go through the bottlenecks involved.

In 2006, the limit of currency positions by South Korean banks was set at 30% of their capital. This was later reviewed to 50% after the bank saw that many people were interested in forex trading. Later on, the country’s financial regulators also sought to improve forex trading by easing the currency forward trading rules. This ensured that the risk from settlement mismatch was reduced by foreign investors that sell Korean securities and seek to change the proceeds to other currencies. Furthermore, entities that were offering financial services were exempted from reporting any currency-related transactions to the authorities, especially if they were done over the counter. Another set of rules that were announced to tighten the regulations on forex trading included setting new standards for liquidity risk management, the mandatory minimum requirement of holding safe foreign currency assets by local banks, and the restriction of currency forward transactions by firms that are not in the financial industry.

Features to consider before choosing a Korean Forex Broker

Trading instruments

Aside from the regulations, it is also critical to look at what a forex broker is offering when it comes to the number of trading instruments that they have. Depending on what you want to trade, it is imperative to check that your favorite Korean broker has enough trading instruments. For example, most people may want to trade currencies and put in some other instruments such as CFDs in their portfolio. You also need to check whether the trading instrument that you wish to get is approved in your country. For example, some countries in Asia are known to prohibit the trading of cryptocurrencies.

Trading platforms and tools

The trading platforms that you choose will go a long way to determining your trading experience as a currency trader. Which platform are you considering if you wish to trade in S. Korea? Well, the country allows the electronic transfer of funds or trading of currencies. Forex brokers offer a wide range of trading platforms and it is up to you to decide which one works best for you. You can choose to use a web browser platform, computer applications, smartphone apps, or any other devices that your brokerage company allows.

Forex spreads and commission

The amount of commission and spreads that your broker charges will eat into your profits hence the need to choose a forex broker that has some low spreads. A spread will be the difference between your buying price and the selling price of your currency. Two types of spreads include fixed spreads and floating spreads. The difference is that the spreads are predictable and fixed for the former while spreads do vary for the latter.

Customer services

This is an essential part of forex trading and you must get a forex broker with the best customer support service. The scope and even quality of customer service in forex brokerage companies are quite different among the various FX companies. Although some forex brokers may have faster-responding customer service, others have a better quality of assistance. What do you need to consider when looking for good customer service? Availability, quality of assistance, speed of assistance, local language options, and live chats are some of the popular features among good forex brokers.

Leverage

The amount of leverage that forex brokers have will also impact the quality of trading currencies for their clients. Forex brokers with high leverages such as XM are known to allow traders to use little money to get more funds. The downside with high leverage is that it also increases your predisposition to risk. You will also risk losing it all since both your profit and loss risk are extended. The FSS recently announced that they were reducing the maximum leverage in the country to 1:10 by increasing the margin level to 10%. They also bumped the maintenance levels to 5%. Hedging in the country was also outlawed to help mitigate the amount of risk that traders in the country incur while also protecting novice investors from losing their hard-earned money.

Popular Forex Brokers in Korea

Forex.com

Established in 1999, Forex.com has grown to become a reputable forex broker in the financial services industry. While only having two types of accounts which include the standard and premium accounts, this brokerage firm offers a wide range of features. You can choose to trade with two account types including FOREXTrader and MT4, which is the most popular platform for traders around the world. Also, the company offers 24/7 customer service support in various languages through email, chat, and phone.

eToro

This is a retail trading platform that was created in 2007 and was formerly known as RetailFX. One of the things that this forex broker is known for is its social trading platform changed how traders, especially beginners go about their trading. Initially, the company started as a forex broker but it has widened its pool to include various offerings such as cryptocurrencies, stocks, commodities, and indices among others. The company is also highly regulated by different bodies that include the FCA, ASIC, and even CySEC.