Seoul forex market participants continue to recognize the 3:30 PM exchange rate as the functional closing price, four weeks into the market's 24-hour trading system. Foreign exchange brokerage firms calculate two daily closing prices at 6 AM and 3:30 PM since the continuous trading system launched on the 6th, but market activity concentrates around the afternoon benchmark. The 3:30 PM rate serves as the basis for calculating the Market Average Rate (MAR), which determines the official exchange rate, while the 6 AM closing price remains underutilized due to minimal liquidity during overnight hours.
Seoul Forex Market Calculates Two Daily Closing Prices
The Seoul forex market operates continuously from Monday 6 AM to Saturday 6 AM under the current system. Foreign exchange brokerage firms calculate closing prices twice daily at 6 AM and 3:30 PM, though neither represents an actual market closure. The 6 AM rate serves to track 24-hour trading trends, while the 3:30 PM closing price continues from the previous system when trading occurred from 9 AM to 3:30 PM daily. The 3:30 PM timeframe aligns with the closure of other financial markets including the stock market, and the MAR calculation uses exchange rates and trading volumes from 9 AM to 3:30 PM.
Market Participants Prioritize 3:30 PM Closing Price
Traders identify the 3:30 PM closing price as the primary benchmark due to concentrated trading activity. A foreign bank forex dealer stated, "We still use the 3:30 PM closing price. The 6 AM closing price has no meaning, and NDF quotes from the New York market are being used." Another foreign bank dealer noted, "3:30 PM remains a very important reference point. There is an enormous amount of closing price trading, and after 3:30 PM, there is almost no trading from domestic companies." Market participants report that trading volumes spike around the 3:30 PM closing time due to fixing orders, and market sentiment shifts noticeably after this timeframe.
Dealers Cite Low Liquidity for 6 AM Closing Price Irrelevance
The 6 AM closing price lacks market significance due to minimal trading activity during overnight hours. A foreign bank dealer observed, "Trading between 2 AM and 6 AM is very minimal, and even that appears to follow NDF prices." The presence of active offshore Non-Deliverable Forward (NDF) rates during these hours reduces the need for spot market rates at 6 AM. One foreign bank dealer estimated, "For the 6 AM closing price to be meaningful, New York traders would need to conduct much more trading through our foreign exchange brokers, which would take at least a year." A domestic bank dealer added, "The 6 AM closing price still doesn't seem to have much meaning. Since trading continues immediately (rather than the market closing at 6 AM), it probably won't have much significance going forward."
Expected Shift to 4 PM Benchmark Anticipated Next Year
Market participants anticipate a shift in focus from the 3:30 PM closing price to a 4 PM benchmark when the official exchange rate calculation changes next year. The MAR will be replaced by a Time-Weighted Average Price (TWAP) calculated at 4 PM. A bank dealer explained, "We still have MAR, and futures and securities markets close around 3:30 PM, so we view the closing price at that time as the reference point. The front desk evaluation standard is also 3:30 PM. However, it will gradually change. When the benchmark rate changes to 4 PM TWAP, the reference point will naturally shift to around 4 PM." A foreign bank dealer stated, "When MAR disappears next year and 4 PM TWAP becomes the benchmark rate, we will use the 4 PM closing price much more." A securities firm dealer added, "When 4 PM TWAP becomes the benchmark rate next year, there will be changes. Given the enormous amount of closing price trading, the reference point will likely shift as well."
FAQ
Why do Seoul forex market participants still focus on the 3:30 PM closing price?
Market participants prioritize the 3:30 PM closing price because it coincides with peak trading activity and serves as the basis for calculating the Market Average Rate (MAR). Dealers report concentrated trading volumes around this time due to fixing orders, and the timeframe aligns with the closure of other financial markets including the stock market.
What is the expected change to Seoul's forex market benchmark rate next year?
Next year, the official exchange rate calculation will shift from the Market Average Rate (MAR) to a Time-Weighted Average Price (TWAP) calculated at 4 PM. Market participants anticipate this change will move the functional closing price reference point from 3:30 PM to 4 PM.
