S. Korea to tighten rules on currency margin trading

SEOUL, July 16 (Yonhap) -- South Korea will impose tougher regulations on
currency margin trading in an effort to prevent investor losses and speculation,
the financial watchdog said Thursday.
Margin trading allows investors to place large bets on financial products with a
relatively small amount of money. If executed correctly, margin trading can yield
a huge profit but it can also inflict significant losses on investors.
Starting September, investors will be required to put up collateral, or margin,
amounting to 5 percent of their trading amount, up from the current 2 percent,
the Financial Service Commission (FSC) said
The strengthened measure will lower the leverage in currency margin trading to 20
times of collateral from the current 50 times, it said.
"The tougher rule is designed to prevent investors suffering hefty losses from
sharp currency swings," the FSC said.
Since first permitted in 2005, currency margin trading gained popularity in 2008
here when global currencies registered volatile movements.
The outstanding value of currency margin contracts reached 361 trillion won
(US$289 billion) as of the end of May, with retail investors taking up 99 percent
of the total, according to the FSS.
pbr@yna.co.kr
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