KRW IRSs eligible for clearing are plain vanilla products which exchange fixed rates with floating rates
< Specifications of KRW IRS eligible for clearing >
Item Specifications of eligible transactions
Agreement1) Transactions based on ISDA master agreement and ISDA definitions
Floating rate 91 day CD rate (published by KOFIA)
Fixing date for floating rate calculation2) The business day prior to the first day of the interest calculation (Reset Date)
Spread3) Applied or Not applied(CD flat)
Upfront Fee Applied(payment only on the effective date) or Not applied
Interest calculation and exchange interval 3 months
Effective date The next business day after the transaction day (T+1)
Contract amount Min. KRW 1 bil. ~ Max. KRW 1 tril.
Maturity Max. 20 years
Day Count Fraction4) Actual/365(Fixed), Actual/360, Actual/Actual
Business day Holidays5) Modified Following, Following, Preceding
End of month transactions End of Month (EOM 6)) applicable or not applicable
Interest calculation period adjustment 7) Adjusted
Compound calculation Not applicable
Reference region for calculating business days Seoul (excluding Saturdays)
Base currency KRW
Note 1)
The agreement used for trade execution between counterparties in the OTC derivatives market. Inter-dealer trading market typically uses the Master Agreement published by the ISDA (International Swaps and Derivatives Association)
Note 2)
Fixing date to determine the floating rate, every 3 months, to be exchanged with the fixed rate. In KRW IRS market, the business day prior to the first day of the interest calculation period (approximately 3 months)
Note 3)
The spread added up to the CD rate, if any.
Note 4)
The method of counting the number of days when calculating the interest amount per 3 month period. In the KRW IRS market, it is most popular to divide the actual number of days by 365 (Actual/365(Fixed)). There are Actual/Actual, Actual/360 and 30/360, too.
Note 5)
If the interest exchange date or the maturity date falls in a holiday, the date is adjusted. In the KRW IRS market, the payment is postponed to the next business day other than the case where the postponed day is after the end of the month, in which case, the payment is usually made earlier than the original payment date (Modified Following). There are, also, Following, Preceding, and Modified Preeeding.
Note 6)
If the transaction’s effective date is the last business day of the month, the interest exchange date will be the end of the month, regardless of the effective date.
Note 7)
In case where the interest exchange dates are changed according to holiday adjustment, the actual interest calculation period is adjusted based on the changed period or not adjusted. In KRW IRS market, normally Adjusted method is used.
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