Korea Exchange Filed Application For Exempted Security Designation Of Treasury Bonds With SEC - Designation Expected To Increase KTB Futures Trading And Enhance International Confidence

The Korea Exchange (KRX) filed an application for the designation of Korean treasury bonds as exempted security with the United States Securities Exchange Commission (SEC) on June 28, 2005, in accordance with the U.S Securities Act. Increasing opportunities for US investors to trade in KTB futures represents part of the exchange’s efforts towards global expansion. Designation is normally awarded around 6 months after the official filing of an application to the SEC.

The US financial authorities allow US residents to trade in futures contracts involving foreign government bonds which have been designated as exempted securities by the SEC as a protective measure.

The SEC grants designation as exempted security in connection with futures trading involving foreign government debts by adding a country to the list under Rule (17 CFR 240.3a12-8).

As of the first quarter of 2005, foreigner investors, mainly from Singapore, the U.K, and Australia, held a 9.4% share of the KTB futures market. However, US investors are currently barred from directly investing in the market as Korea treasury bonds, the underlying asset for the futures, have not been designated as exempted security.

If the designation is granted, US investors can directly trade KTB futures, which will increase liquidity and international confidence and expand business scope for local futures companies.

KTB futures were listed on September 30, 1999 and ranked 9th globally with an average daily volume of 47,709 contracts during the first quarter of 2005. They represent one of the KRX’s key products along with KOSPI 200 futures and options.