UBS, one of the largest equity players in Asia, is planning to set up an onshore equity derivatives operation in Korea to tap the burgeoning market. "This will allow us to become a liquidity provider in the new warrants market as well as book trades onshore," said Min Park, managing director and Asian head of equity risk management in Hong Kong. The move onshore would allow the firm to enter the Korean warrants as a market-maker and that market--which launched at the end of last year (DW, 1/6)--is quickly becoming one of the largest in the world. Also, placing more of the firm's capabilities closer to end-users would give it improved market intelligence and quicker reaction time in terms of product development.
The firm trades cash equity and fixed-income derivatives via its Seoul-based branch, but requires a separate securities license to kick-off equity derivatives--for which the bank is in discussions with the Financial Supervisory Service.
Last year Merrill Lynch, Credit Suisse, and Lehman Brothers obtained full derivative licenses in Korea (DW, 9/9/05) after plunking down millions in onshore capital requirements. Equity officials said the FSS is currently surveying the make-up of the market which includes over a dozen local houses before allowing additional entrants, meaning the Swiss bank won't enter the market overnight.
However, UBS is hopeful that it will receive the go-ahead in the coming months--after which it would begin to put market and credit risk systems in-place, along with onshore traders. "This will put us closer to clients," he explained, as the firm currently offers equity-derivative products on Korean underlying but structured offshore in Hong Kong.
