Lehman Brothers is considering setting up an interest-rate and equity derivatives operation in Korea because of planned changes to the Securities and Exchange Act in July. The firm, which has an investment banking operation in Seoul and runs an offshore Korean trading book from Tokyo and Hong Kong, plans to make the push on the back of establishing a branch in Seoul. "We [expect to] receive a branch license in March and expect trading to begin shortly thereafter," said David Kim, managing director of the financial institutions group at Lehman in Seoul. Kim will be responsible for the cash equity and fixed-income products.
The Financial Supervisory Service will recommend allowing securities firms to trade over-the-counter derivatives in May or June and expects it to be approved by July, according to Hochul Shin, supervisor of business conduct of securities companies at the FSS. He added that the regulator is still finalizing the level of the net capital ratio and the size of capital each firm would need to set aside to trade OTC derivatives. At the moment the FSS is suggesting each firm would need to set aside KRW300 billion (USD229 million). J.K. Kim, Korea chief administration officer at Lehman in Seoul, thinks this is too large and may prevent Lehman entering the market. Shin said it is set at this level because of the potential for losses.
The move by Lehman in Korea follows a trend of international firms setting up shop in recent months, including Barclays Capital and Goldman Sachs (DW, 1/21).
