Always-on won: dealers fret about risks in landmark shift to 24-hour trading

• The always-on trading system includes new safeguards: offshore investor permits to hold won directly, an offshore settlement system, and overdraft policies to prevent liquidity gaps
• About 20% of spot trading volume already occurs during offshore hours in London; banks are adding night shift staff to manage 24-hour operations, with Hana Bank adding three staff and Woori Bank doubling its UK team to four
• MSCI kept South Korea in 'emerging market' status on June 25, citing insufficient onshore liquidity despite extended FX hours, with the next review scheduled in one year

Summary: South Korea Launches 24-Hour Won Trading Amid Market Concerns

Key Development: South Korea will begin 24-hour currency trading on July 6, 2025, with banks starting trial runs on June 29. This marks a landmark shift from the won's limited trading hours, which were restricted to 9 a.m.-3 p.m. for years before extending to 2 a.m. just two years ago.

Strategic Rationale: The move aims to secure MSCI "developed market" status, which would boost South Korea's profile among global investors. Seoul also seeks to eliminate the "Korea Discount"—the tendency for Korean stocks to trade at steep discounts to global peers due to currency restrictions, governance issues, and unpredictable policymaking. However, MSCI kept South Korea in the "emerging market" category on Wednesday, citing insufficient onshore liquidity.

Market Context: The won is languishing near a 17-year low against the dollar, making it vulnerable to thin liquidity that could trigger disproportionate price swings. Paradoxically, the KOSPI index has doubled to all-time highs this year, leading to record overseas fund selling to book profits while Korean investors continue aggressive buying of U.S. equities.

Implementation Details: New safeguards include offshore investor permits to hold and trade won directly, an offshore settlement system, and overdraft policies. Roughly 20% of spot trading already occurs during offshore hours, concentrated in London mornings. Major banks are staffing up—Hana Bank adding three staff to its 37-member FX team, Woori Bank doubling its UK team to four, and Shinhan and KB Kookmin adding London personnel.

Operational Challenges: Veteran traders like Hana Bank's Namkoong Taehun (18-year career) describe the transition as "daunting," with concerns about significantly increased workloads and managing volatile overnight flows.