Foreign derivatives houses, including Deutsche Bank, Salomon Smith Barney and Credit Lyonnais, are beefing up their Korean equity derivatives presence in anticipation that new rules allowing Korean end users access to the onshore market will result in business trickling through to the offshore mart. "We've been building up our exchange-trading presence in Korea," said Nick Fennell, head of equity derivatives at Deutsche Bank in Hong Kong. Harold Kim, managing director of Asia Pacific equity derivatives at Salomon Smith Barney in Hong Kong, also has high hopes for the onshore OTC mart resulting from clearer regulations and local houses entering the fray.
With the new guidelines, the onshore equity derivatives market is technically open to all--including international firms that are prepared to meet the KRW300 billion (USD248 million) capital requirement rule. Since few are expected to do this, foreign firms are more likely to enter the interbank market to trade with Korean financial institutions. If there is a high level of activity among local houses and corporates, Deutsche Bank will consider applying for a license to enter the onshore market, Fennell said, declining to elaborate.
Harold Moon, manager of equity derivatives marketing at LG Investment & Securities Co. in Seoul, said the firm expects to hedge some of its derivatives positions with foreign firms once it receives its license at the end of the month. LG plans to trade over-the-counter options as well as structure instruments such as reverse convertibles. Kookmin Bank has also been studying setting up an equity derivatives operation but has not yet applied for a license, said K.K. Yoo, head of derivatives in Seoul.
Credit Lyonnais last week hired Austin Um, an equity derivatives marketer at Société Générale in Hong Kong, to be the firm's first marketer and structurer dedicated to Korea, according to Julien Bahurel, senior sales manager in equity derivatives in Hong Kong. In recent months Lehman Brothers and JPMorgan have also been expanding their marketing presence for the Korean equity derivatives market (DW, 6/23).
