CFD Trading Volume Soars in 2020

The Financial Supervisory Service announced on May 16 that the size of the contract for difference (CFD) segment of the South Korean stock market increased by more than 22 trillion won last year. Specifically, it soared from 8.4 trillion won in 2019 to 30.9 trillion won in 2020 with Kiwoom and Kyobo Securities in particular increasing their CFD brokerages rapidly.

This year, the brokerage and arrangement of stock-related OTC derivatives, including the instrument for a maximum leverage of 1,000 percent, recently added up to 160.5 trillion won with a year-on-year increase of more than 100 percent. On the other hand, the brokerage and arrangement of OTC derivatives related to currencies, interest rates and commodities more than halved year on year.

According to the Financial Supervisory Service, the OTC derivatives trading volume of South Korean financial companies was 17,019 trillion won last year, down 5.2 percent from a year ago. Currency-related trading accounted for 77.9 percent of the total. Currency forwards and interest rate swaps showed a decrease of 657 trillion won and 155 trillion won to result in the overall decrease. The currency-related trading decreased 4.9 percent from a year ago.

“The global economic recession and trade slowdown caused by COVID-19 led to a decrease in the volume of international trade on the corporate side,” the Financial Supervisory Service explained, adding, “As a result, the hedge demand decreased along with those types of trading.”
 

Banks accounted for 79.5 percent of the OTC derivatives trading volume, followed by securities companies (15 percent) and trust companies (4.4 percent). Currency forwards and interest rate swaps by banks added up to 10,210 trillion won and 2,756 trillion won, respectively. Those banks and securities companies’ trading in relation to foreign financial companies made up 40.2 percent of their total.