RBC Capital Markets Becomes First Canadian Bank to Trade Korean Won Onshore

RBC Capital Markets has become the first Canadian bank to directly trade the Korean won (KRW) onshore, a development that expands cross-border currency access and deepens financial ties between Canada and South Korea. The milestone, confirmed by the bank in a statement, allows RBC to execute won-denominated transactions within Korea’s regulated foreign exchange market, a move previously restricted to a narrower set of international institutions.

What This Means for Korea Market Access

Onshore KRW trading has historically been limited to domestic Korean banks and a select group of foreign financial institutions that meet strict regulatory criteria set by the Korean Ministry of Economy and Finance and the Bank of Korea. By securing this capability, RBC Capital Markets can now offer its institutional clients direct access to the Korean won market without relying on offshore non-deliverable forward (NDF) contracts, which have been the traditional alternative for foreign investors.

The shift from NDFs to onshore trading reduces counterparty risk and improves pricing transparency for clients. It also aligns with South Korea’s broader efforts to internationalize the won, a process that has included incremental liberalization of its capital account and foreign exchange regulations over the past decade.

Strategic Importance for Canadian Finance

Canada and South Korea have maintained a free trade agreement since 2015, and bilateral trade in goods exceeded $16 billion in 2023. However, direct financial market integration has lagged behind trade flows. RBC’s move signals growing demand from Canadian institutional investors—including pension funds, asset managers, and corporations—for direct exposure to Korean assets, particularly in bonds and equities.

The Korean bond market, valued at over $2 trillion, is one of the largest in Asia and has attracted increasing foreign inflows following its inclusion in major global bond indices. Direct onshore won trading removes a significant operational barrier for Canadian investors seeking to participate in this market.

Regulatory and Operational Context

To obtain onshore KRW trading approval, foreign banks must demonstrate compliance with Korea’s foreign exchange transaction reporting requirements, maintain adequate capital reserves in local currency, and establish operational infrastructure within the country. RBC Capital Markets has operated a Seoul branch since 2011, providing a foundation for this expansion.

The bank’s approval is part of a broader trend: South Korea has gradually expanded the list of foreign institutions permitted to trade won onshore, including select banks from the United States, Europe, and now Canada. The move is also consistent with Korea’s push to have the won included in the International Monetary Fund’s Special Drawing Rights basket, a goal that requires deeper and more accessible foreign exchange markets.

Implications for the Broader Market

Industry observers note that RBC’s entry could encourage other Canadian and international banks to seek similar approvals, potentially increasing liquidity in the onshore won market. For Korean regulators, the development provides validation of their market-opening policies and could support further liberalization measures.

For Canadian investors, the immediate benefit is more efficient execution of won-denominated trades, lower costs, and reduced reliance on derivative instruments. The move also strengthens RBC Capital Markets’ competitive positioning in Asia, where it has been expanding its foreign exchange and fixed-income capabilities.

Conclusion

RBC Capital Markets’ achievement as the first Canadian bank to trade the Korean won onshore represents a tangible step forward in Canada-Korea financial integration. It reflects both South Korea’s gradual market opening and growing Canadian institutional demand for direct Asian currency access. The development is likely to be followed by further cross-border financial initiatives as both countries deepen their economic relationship.

FAQs

Q1: What does ‘onshore KRW trading’ mean?
Onshore KRW trading refers to the direct purchase and sale of Korean won within South Korea’s regulated foreign exchange market, as opposed to offshore trading through non-deliverable forward contracts. It allows for physical settlement of the currency.

Q2: Why is this significant for Canadian investors?
It provides Canadian institutional investors with direct, cost-effective access to the Korean won, enabling more efficient investment in Korean bonds, equities, and other assets without the added complexity and cost of offshore derivatives.

Q3: How does this affect the Korean won’s international standing?
Expanding the list of foreign banks permitted to trade won onshore supports South Korea’s goal of internationalizing its currency, potentially paving the way for inclusion in the IMF’s Special Drawing Rights basket and increasing the won’s role in global trade and finance.