South Korean foreign exchange brokers expressed optimism about new market opportunities following the Ministry of Finance and Economy's decision on the 3rd to change the dollar-won exchange rate benchmark calculation to a 4 PM time-weighted average price (TWAP) method, effective January 1 next year. The regulatory shift comes as Seoul's forex market transitioned to 24-hour trading five days a week, replacing the previous Market Average Rate (MAR) system that calculated rates from 9 AM to 3:30 PM. While brokers initially worried about losing commission revenue from MAR-based transactions—a core market for corporate currency exchanges and non-deliverable forward (NDF) fixing—officials now anticipate the emergence of TWAP-based derivative products to serve existing trading demand under the new framework.
Ministry Confirms TWAP Implementation Timeline
The Ministry of Finance and Economy revised foreign exchange transaction regulations on the 3rd to adopt the 4 PM TWAP method for calculating the dollar-won benchmark rate. The new regulation takes effect January 1 next year, while the existing MAR system—which weights exchange rates and trading volumes from 9 AM to 3:30 PM—remains in place until year-end. Seoul's forex market began 24-hour operations five days a week, eliminating the previous "pre-opening" period that underpinned MAR trading.
Brokers Shift from Concern to Optimism on New Benchmark
Early in the year, some FX brokers voiced concerns about potential revenue loss if MAR-based markets disappeared entirely. An FX brokerage official stated, "The abolition of MAR products has not been confirmed, but the existing MAR-based benchmark method will disappear starting next year. Only the benchmark rate calculation method is changing—the market that traded like MAR itself will not disappear." The official added, "After the TWAP-related market emerges in Seoul's forex market, things will likely sort themselves out over time. Trading based on the new standard can occur like the existing spot MAR market."
Another brokerage official noted, "There are many places that institutionally use MAR, and an adaptation period is needed, so a transition process will be involved. Internationally, the WMR (World Market Refinitive rate) is used, and domestically TWAP is being introduced as a corresponding concept, so the market will gradually stabilize."
Officials Anticipate TWAP-Based Product Development
Brokers expect new derivative products to emerge based on the 4 PM TWAP benchmark. The second official explained, "MAR is also not an exchange rate at a specific point in time, but a weighted average rate for the entire day. When 4 PM TWAP is created, products based on it can also be newly derived." The official added, "Products that did not exist can be created as needed. If there are good ideas for new products using TWAP, it would be great if market participants could suggest them together." One broker remarked, "If MAR products disappear, other products will emerge. If you have good ideas, please let us know."
FAQ
What did South Korea's Ministry of Finance and Economy announce on the 3rd regarding forex benchmarks?
The Ministry revised foreign exchange transaction regulations to calculate the dollar-won benchmark rate using a 4 PM time-weighted average price (TWAP) method, effective January 1 next year.
Why are FX brokers optimistic about the TWAP transition despite initial concerns?
Brokers believe existing trading demand will continue under the new TWAP framework and anticipate the creation of new derivative products based on the 4 PM benchmark, similar to how MAR-based markets operated previously.
