During the holiday period, the won to dollar exchange rate plunged to the 1,370 won range, but some securities firms did not reflect this in real-time, causing the applicable exchange rates among securities firms to differ by nearly 100 won. Although securities firms that do not reflect real-time exchange rates settle the discrepancies afterward, there was significant confusion for investors who were trying to easily compare the applicable exchange rates among different securities firms. There are suggestions that investors should carefully check the foreign exchange structures of securities firms when exchange rate volatility increases.
According to the securities industry on the 7th, the won to dollar exchange rate fluctuated between 1,370 and 1,380 won, while as of 6 p.m. on the 6th, Samsung Securities had an applicable exchange rate of 1,486.82 won. At the same time, the applicable exchange rates for Toss Securities (1,388 won) and Korea Investment & Securities (1,384 won) were nearly 100 won apart. The applicable exchange rates for Kiwoom Securities (1,444 won) and Mirae Asset Securities (1,410 won) were also in the 1,400 won range.
The reason large securities firms, including Samsung Securities, did not reflect the drastic decline in the won to dollar exchange rate is due to the differing foreign exchange structures among securities firms. While Toss Securities and Korea Investment & Securities reflect real-time exchange rates (Non-Deliverable Forward (NDF) rates), Samsung, Mirae Asset, and Kiwoom Securities handle exchanges based on the last posted exchange rate in the regular trading session.
For example, Samsung Securities uses a temporary exchange rate (premium rate) set at '105% of the previous exchange rate' when conducting off-hours exchanges.
They calculated the exchange rate based on the closing price of the Seoul foreign exchange market (1,401.05 won) on the 2nd, which was the last regular trading day before the holiday, but the offshore won to dollar exchange rate plummeted to 1,372.9 won on the 5th during the market closure, increasing the gap between the applicable exchange rate and the actual exchange rate.
Simply comparing the applicable exchange rates of securities firms might lead to misunderstandings of currency losses. However, it is difficult to say that customers who exchanged through Samsung and Mirae Asset Securities incurred losses. These securities firms initially conduct exchanges based on the posted exchange rate, then compare the first exchange rate (posted rate) and temporary rate during the next business day to settle the difference.
In simpler terms, they first exchange at a rate 5% higher than the previous rate, and then return any difference based on the next business day's exchange rate. Conversely, if the exchange rate significantly rises on the next business day, the investor must bear the additional cost corresponding to the increase in exchange rate.
Mirae Asset Securities also uses a temporary exchange rate during off-hours exchanges. According to Mirae Asset Securities, they first conduct the exchange using a temporary rate that is the previous rate plus 5 won, and then readjust the settlement based on the initial rate on the next business day, refunding the difference in won or charging additionally.
Although post-settlement occurs, the inconvenience of not reflecting real-time exchange rates is significant. Most importantly, investors who exchange currencies during the night or on holidays cannot immediately know the actual applicable exchange rate, leading to great uncertainty. They must also wait until the next business day for the exchange results (including difference settlements). Particularly for investors who want to exchange immediately using the real-time rate, if the exchange rate on the next business day differs from expectations, they might not obtain the expected currency gain.
This is why investors who need to overcome the hurdle of currency exchange to trade overseas stocks should carefully check the foreign exchange structures of each securities firm.
Additionally, investors should consider the exchange rate discount policies among securities firms. For example, while both Samsung Securities and Kiwoom Securities adopt the same off-hours exchange structure, the discount rates differ, resulting in an applicable exchange rate difference of nearly 40 won at the same time. Toss Securities offers a 95% exchange rate discount from 9:10 a.m. to 3:20 p.m. (on the business days of the Seoul foreign exchange market), but this discount rate decreases to 50% outside this time frame.