South Korea Financial Services Commission proposes omnibus trading accounts and legal clarifications to support global investors’ trading of Korea Treasury Bonds

The South Korea Financial Services Commission (FSC), with relevant organizations, proposed amendments and issued authoritative interpretations to support foreign investment in Korea Treasury Bonds (KTBs) following Korea’s inclusion in the World Government Bond Index (WGBI). The package is designed to enable more consolidated KTB trading and to facilitate adoption of a “Global Operating Model” in the KTB market. To complement the June 2024 introduction of omnibus settlement accounts, the FSC clarified that foreign financial investment service providers may consolidate clients’ KTB trading orders for linkage to omnibus settlement accounts, and proposed revisions to the Regulations on Financial Investment Business to introduce omnibus trading accounts for KTBs. Under the envisaged structure, foreign investors would place orders through omnibus trading accounts opened with securities firms and banks, and settle through omnibus settlement accounts at the Korea Securities Depository. For the Global Operating Model, authoritative interpretations clarified that foreign banks and domestic dealer banks may sell KTBs they do not own and subsequently buy them to meet foreign investor demand, while planned amendments to the enforcement decree of the Financial Investment Services and Capital Markets Act would permit foreign banks to buy KTBs from foreign investors and sell them to domestic banks before settlement of the purchased bonds. The FSC indicated it would complete the actions requiring authoritative interpretations and proceed with the regulatory and enforcement decree revisions as soon as possible.