Korean regulator moves to severely limit retail forex trading

On December 1st the Korean Financial Supervisory Service introduced Sound Forex Forex Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Read this Term Market guidelines the purpose of which is to considerably step up forex regulation in Korea. According to Korean FSS retail forex traders have a high losing probability due to excessive Leverage Leverage In financial trading, leverage is a loan supplied by a broker, which facilitates a trader in being able to control a relatively large amount of money with a significantly lesser initial investment. Leverage therefore allows traders to make a much greater return on investment compared to trading without any leverage. Traders seek to make a profit from movements in financial markets, such as stocks and currencies.Trading without any leverage would greatly diminish the potential rewards, so traders In financial trading, leverage is a loan supplied by a broker, which facilitates a trader in being able to control a relatively large amount of money with a significantly lesser initial investment. Leverage therefore allows traders to make a much greater return on investment compared to trading without any leverage. Traders seek to make a profit from movements in financial markets, such as stocks and currencies.Trading without any leverage would greatly diminish the potential rewards, so traders Read this Term and insufficient understanding of risks involved.

The FSS therefore announced that it is reducing leverage to 1:10 by increasing initial margin level to 10% from 5% and maintenance level to 5% from 3%. Hedging position will no longer be allowed as well. Furthermore, FSS will demand from securities and futures firms to strengthen their Risk Disclosure Statements including the quarterly P/L account ratio report, and limit excessive promotion of securities and futures companies trying to attract retail users.

For those that require technical changes new rules will be enforced from the first quarter of next year and for those that require changes in procedures such as limitation of promotions the new rules will come into effect this month.

The new rules and limitations will be extensively profiled in the Q4 report due January 2012.

Korean forex market has been extensively profiled in the latest Forex Magnates Retail Forex Industry Report.