Implementation of 24-Hour Won-Dollar Trading: The Implications and Risks of Expanding Trading Hours in the Seoul Foreign Exchange Market

Won-dollar trading on the Seoul foreign exchange market will expand to a 24-hour system starting July 6, 2026. The key point is not simply the statement that “the won can be bought and sold freely at any time,” but rather a systemic change aimed at aligning the Korean foreign exchange market with more global trading hours, accessibility, and settlement structures.

This change will reduce time constraints on currency exchange and hedging for foreign investors, import-export companies, and investors in overseas assets. At the same time, insufficient liquidity during nighttime hours can cause significant exchange rate fluctuations or temporary price distortions even for small orders. Therefore, the 24-hour trading system represents not only an expansion of convenience but also a shift in market management practices.

Key Summary

What Will Change?

1. The trading gap for the won-dollar pair will effectively disappear

The Seoul foreign exchange market previously opened at 9:00 a.m. and closed at 2:00 a.m. the following day. Starting July 6, 2026, it will operate continuously from 6:00 a.m. on Monday to 6:00 a.m. on Saturday, based on New York Daylight Saving Time. When New York Daylight Saving Time is not in effect, trading hours will be from 7:00 a.m. on Monday to 7:00 a.m. on Saturday.

However, the term “24-hour won trading” requires a clear distinction regarding its scope. This reorganization directly applies to won-dollar trading conducted through brokerage firms. Trading between the won and non-dollar currencies—such as the euro, yen, and pound—will maintain their existing trading hours.

2. Won-dollar trading is available even on domestic public holidays

With the exception of weekends and January 1, won-dollar trading is available even on domestic public holidays. For example, if U.S. financial markets are operating normally on a Korean public holiday and there are significant movements in global dollar flows, market participants can respond by trading won-dollar pairs within the Seoul foreign exchange market.

However, trading and settlement are different. Even if a trade is executed on a public holiday, the actual settlement of funds is processed based on bank business days. Corporations and financial institutions must consider not only trading hours but also settlement dates, internal limits, collateral, and accounting standards.

3. The reference exchange rate system may change gradually

The existing weekly closing price and trading reference rate will remain in place for the time being. Currently, the trading reference rate is calculated based on the exchange rates and trading volumes during specific time periods; however, under a 24-hour trading system, determining which point in the day to use as the basis for setting the representative exchange rate becomes more important.

Foreign exchange authorities and the market have been exploring the need for new calculation methods, such as the time-weighted average price (TWAP). However, since the reference exchange rate is directly linked to corporate accounting, taxation, trade settlements, and the valuation of financial products, a grace period is necessary to minimize market confusion.

Why Introduce 24-Hour Trading?

To Lower the “Time Barrier” for Foreign Investors

Foreign investors in Korean stocks or bonds must buy or sell the Korean won. However, if won-dollar trading is only possible during specific hours, it is difficult to respond immediately to market events occurring during U.S. or European business hours.

24-hour trading alleviates this problem. Overseas investors can handle currency exchanges related to investments in Korean assets during their home country’s business hours, and domestic financial institutions and companies can also reflect overnight global events without having to wait until the next morning.

It Is Linked to Inclusion in the MSCI Developed Markets Index

South Korea has long sought inclusion in the MSCI Developed Markets Index. While the Korean stock market is large in terms of size and liquidity, issues such as won currency exchange and settlement, foreign investor account management, English-language disclosures, short selling, and settlement infrastructure—all factors evaluated by MSCI in terms of market accessibility—have repeatedly been points of contention.

The roadmap announced by the government in January 2026 outlined a series of tasks, including modernizing the foreign exchange market, establishing securities trading and settlement systems that meet global standards, improving the convenience of investor registration and account opening, rationalizing short-selling regulations, and enhancing English-language disclosure. Among these, the opening of a 24-hour foreign exchange market is a key initiative aimed at improving access to the foreign exchange market.

However, 24-hour trading alone will not resolve the MSCI issue

The market openness required by MSCI does not simply mean “keeping the Seoul market open longer.” The key factors that global investors consider are as follows:

• Is it sufficiently possible to settle in won even from overseas?
• Does won-dollar trading provide sufficient liquidity and tight bid-ask spreads even at night?
• Can foreign investors predictably conduct currency exchange, settlement, account management, and hedging?
• Are these systems not only in place but also functioning stably as actual market practices?

In the June 2026 MSCI review, South Korea was not included in the list of developed markets under observation and retained its emerging market status. The main reasons cited were the lack of offshore settlement capabilities for the won, insufficient liquidity during extended trading hours, and practical constraints on foreign exchange operations. Therefore, while 24-hour trading represents significant progress, it is less a sufficient condition for MSCI inclusion and more of a starting point for validating market accessibility.

Impact by Market Participant

Foreign Investors

Foreign investors can now exchange won for dollars even at night or in the early morning (Korean time), allowing them to more flexibly coordinate trading in Korean stocks and bonds with currency hedging. In particular, they have a shorter response time when Korea-related news breaks during U.S. or European trading hours, or when global interest rates or dollar trends shift.

However, the actual level of convenience depends on trading counterparties, brokerage systems, won settlement structures, internal compliance, and overnight liquidity. Even with extended trading hours, market impact from large orders can remain significant if the order book is thin.

Import and Export Companies

Exporters can choose from a wider range of times to convert their dollar revenue into won, while importers have increased opportunities to hedge against dollar settlement costs. For example, when the dollar fluctuates sharply immediately after the release of U.S. economic indicators, companies previously had to wait until the next trading day, but under a 24-hour system, they can respond within the market.

However, not all companies will immediately benefit from 24-hour trading. Key factors include how a company’s primary bank provides overnight foreign exchange, forward contracts, and hedging services; whether internal approval procedures allow for overnight trading; and how the company applies its accounting reference exchange rate.

Individual Overseas Investors

Individual investors can expect the time lag between trading foreign stocks and exchanging currency to shrink. However, this does not mean that consumer-oriented foreign exchange services offered by banks and securities firms will expand at the same pace as the 24-hour opening of the Seoul foreign exchange market. Investors must verify each financial institution’s systems, terms and conditions, spreads, maintenance windows, and scope of service.

Foreign Exchange Authorities and Financial Institutions

For foreign exchange authorities, the timeframe for market surveillance and stabilization will lengthen. Financial institutions must strengthen their night desks, electronic foreign exchange trading (eFX), limit management, abnormal transaction detection, incident response, and settlement risk management systems.

While 24-hour trading allows market prices to form more continuously, it also means that abnormal orders or concentration of trading activity during specific time periods can be reflected in exchange rates more quickly. Therefore, extending trading hours requires a corresponding expansion of both technological infrastructure and risk management.

Will Exchange Rate Volatility Increase?

Reducing Trading Gaps Can Lower Gap Risk

If major news breaks overseas while the foreign exchange market is closed, that information is reflected all at once in the next opening price. This can be viewed as “gap volatility.” If trading hours are extended, information will not be concentrated at a single point in time but can be reflected in prices over a period of time.

The Korea Capital Market Institute analyzed the effects of extending trading hours from a 3:30 p.m. close to a 2:00 a.m. close the following day in July 2024. The results showed that no significant increase in volatility was observed following the extension of trading hours, and nighttime gap volatility was found to have decreased significantly. Furthermore, the analysis indicated that tail risk did not worsen.

However, price distortions can occur if nighttime liquidity is thin

Longer trading hours do not necessarily mean that market depth is the same across all time zones. During nighttime hours, real demand from imports and exports, as well as quotes from domestic institutions and brokers, may be lower than during daytime hours. In such cases, even small orders could cause significant fluctuations in the exchange rate, or the market might overreact to global news.

Therefore, the key to a 24-hour trading system lies not simply in keeping the market open, but in meeting the following conditions:

• Are there sufficient buy and sell quotes available even at night?
• Is there sufficient market depth to handle large orders in batches?
• Can electronic trading system failures and abnormal transactions be monitored in real time?
• Does the direct participation of foreign financial institutions lead to an actual increase in trading volume?
• Are the response guidelines for authorities and financial institutions clear in the event of market stress?

Relationship with the Internationalization of the Won

The internationalization of the won refers to the won evolving in a direction that makes it easier for foreign investors and companies to trade, hold, and settle transactions in the won. 24-hour won-dollar trading is one step in this process. However, true internationalization requires broader conditions.

In other words, keeping the Seoul market open 24 hours a day constitutes an “extension of onshore trading hours.” What MSCI and global investors prioritize more highly is whether won-denominated settlements and hedging are sufficiently possible even in offshore markets, and whether liquidity during the extended trading hours is actually deep.

Differences from the 2008-Style Market Management

In the past, the Korean foreign exchange market was subject to relatively strong regulatory influence. The shorter the trading hours and the more participants were centered on domestic financial institutions, the easier it was for authorities to concentrate market stabilization measures during specific time periods.

However, as trading hours lengthen and participation by overseas financial institutions increases, the market becomes broader and more decentralized. While this can improve price discovery, it may make it more difficult for authorities to track position flows across all time zones and among all participants as closely as they do during daytime hours.

Therefore, future market stabilization is likely to rely more on data-driven monitoring, transparent communication, market-making functions, liquidity provision channels, and electronic trading risk management than on simple direct intervention.

Key Practical Points to Check

What Companies Should Check

• Whether their primary bank offers overnight won-dollar spot and forward exchange services
• Whether the spreads and limits applied to overnight trading differ from those during daytime hours
• How settlement dates for transactions on public holidays are postponed
• What time point is used for accounting purposes and the internal reference exchange rate
• Whether approval authority and risk limits for overnight trading are in place

What Individual Investors Should Check

• Whether the available hours for currency exchange at their bank or brokerage firm are actually extended
• Are the spreads and preferential rates for overnight currency exchange the same as during the day?
• How are the settlement times for overseas stock trading and currency exchange linked?
• What are the maintenance windows, order acceptance times, and cancellation policies for currency exchange?

Indicators from a Policy Perspective

• Trading volume and bid-ask spreads during overnight hours
• Actual trading participation by overseas financial institutions (e.g., RFI)
• Discrepancy between daytime closing prices and nighttime prices
• Occurrence of abnormal trading during public holidays and early morning hours
• Extent of price reversals following sharp fluctuations in exchange rates during major global events
• Improvements in foreign exchange-related items in the MSCI Market Accessibility Assessment

Conclusion

24-hour won-dollar trading represents a significant shift toward a more global operating system for the Korean foreign exchange market. Domestic and international investors and corporations will benefit from reduced trading gaps, and the Korean capital market will gain a testing ground to demonstrate improved market accessibility in discussions regarding inclusion in the MSCI Developed Markets Index.

However, 24-hour trading is not an end in itself but rather the beginning of a validation process. The system’s effectiveness will be maximized only if sufficient liquidity is maintained overnight and if settlement, surveillance, and risk management operate stably even on public holidays and during early morning hours. The key going forward is not “how long the market stays open,” but rather “how deep and reliable the market operates during the hours it is open.”