On December 1st the Korean Financial Supervisory Service introduced Sound Forex Market guidelines the purpose of which is to considerably step up forex regulation in Korea. According to Korean FSS retail forex traders have a high losing probability due to excessive leverage and insufficient understanding of risks involved.
The FSS therefore announced that it is reducing leverage to 1:10 by increasing initial margin level to 10% from 5% and maintenance level to 5% from 3%. Hedging position will no longer be allowed as well. Furthermore, FSS will demand from securities and futures firms to strengthen their Risk Disclosure Statements including the quarterly P/L account ratio report, and limit excessive promotion of securities and futures companies trying to attract retail users.
For those that require technical changes new rules will be enforced from the first quarter of next year and for those that require changes in procedures such as limitation of promotions the new rules will come into effect this month.
The new rules and limitations will be extensively profiled in the Q4 report due January 2012.
Is this gonna stop Korean traders to open accounts with overseas brokers? Unless they can stop the international wire transfer for forex trading, it does not matter whether it is 5% margin, or 10%, they wont choose domestic brokers anyway.