Merrill Lynch is considering launching an onshore interest-rate derivatives desk in Korea this year as the regulatory environment will open up for securities houses in the coming months, according to officials at the firm. "We are juggling with the risk/reward, cost versus profit equation," said an official at Merrill in Hong Kong. He continued that the firm will make the decision in the next couple of months but noted if it goes ahead it could be up and running by year-end. Currently interest-rate derivatives marketing for Korea is handled out of Hong Kong while Tokyo is the regional hub for trading.
"Korea is obviously a country where we see potential. We have to look at all of the possibilities," the official added. However, he noted that Merrill would need to set aside a large amount of capital if it wished to enter the market with a securities branch, which may prove to be a deciding factor for the firm. The Financial Supervisory Service is suggesting firms set aside KRW300 billion (USD229 million) of capital (DW, 2/18). This move follows several bulge bracket firms, such as Lehman Brothers (DW, 2/18) Barclays Capital and Goldman Sachs (DW, 1/21), which have also stated an interest in Korea.
Mari Kagawa, spokeswoman at Merrill in Tokyo, did not return calls.
