The Korean regulator has delayed legislation that would have allowed local securities houses to trade credit derivatives because the houses are not sophisticated enough. Hyung Ju Lee, deputy director of the securities policy division at the Ministry of Finance and Economy in Seoul, said domestic houses will need to first become more sophisticated in terms of trading and risk management before handling credit products. "Now's not the time," he added. Other derivative asset classes, including interest rate and equity, are permitted.
"This is disappointing," said B.J. Kim, at Dongwon Securities in Seoul. Securities firms will likely receive approval early next year, he added. Last year, domestic houses had expected to receive the go-ahead from regulators for the asset class in the coming months (DW, 7/28).
Local banks, however, are allowed to trade credit derivatives. Several firms, including Korea Development Bank (DW, 5/6/02) and Korea Exchange Bank, (DW, 11/24) are planning desks.
