Foreign derivatives houses in Korea, including Citigroup and Merrill Lynch, are preparing to trade derivatives directly with the multi-billion dollar investment-trust industry and domestic securities houses on the back of upcoming deregulation.
The Ministry of Finance and Economy has announced that it intends to deregulate the nascent onshore equity derivatives market, which kick-started late last year (DW, 9/22/02). Initially, only six licensed domestic securities houses have been able to deal directly with onshore companies in equity derivatives, restricting foreign firms to providing instruments for the local houses to distribute.
Jae Kyu Bae, cio of index and alternative investment strategies at Samsung Investment Trust Management in Seoul, one of the largest investment trust corporations, welcomed the move. He said, "We hope to get some new ideas," adding, "We don't care who we deal with, as long as we get the best price."
Justin Kennedy, managing director in equity derivatives at Citigroup in Hong Kong, said foreign houses will be able to market a wider array of products directly to Korean investment trusts. "It's definitely a positive, we welcome the regulator's push to level the playing field," said James Rodríguez de Castro managing director in global equity-linked products at Merrill Lynch in Hong Kong, noting that ITCs look at the whole range of equity derivatives: "Protecting downside, gaining upside, structured notes--the works."
