The Korea Exchange's ambitious plans to extend trading hours are facing significant setbacks. The introduction of a pre-market has been postponed until the end of next year, and the launch of ETF trading in the aftermarket next month is now in jeopardy. This development diverges sharply from the original goal of establishing a 24-hour trading system by the end of 2027 to enhance competitiveness with global exchanges.
According to financial industry sources on August 11, the Korea Exchange convened asset management firms on August 10 to gauge their interest in participating in aftermarket ETF trading. However, all firms reportedly expressed their intention to abstain. The exchange had previously sought to confirm demand for aftermarket ETF trading in March, July, and again in August, but the latest feedback indicates a lack of interest.
Concerns regarding aftermarket ETF trading first emerged during a meeting of asset management executives on July 28, which focused on single-stock leveraged ETFs amid rising market volatility. Industry experts voiced that the timing for aftermarket ETF trading might be premature. Conversely, the Korea Exchange had anticipated that if larger asset managers showed interest, others would likely follow suit to maintain competitiveness. Initially, some firms had indicated a willingness to participate, but growing concerns over market volatility have shifted the landscape.
Additionally, the decision by the Korea Exchange not to provide real-time indicative net asset values (iNAV) for ETFs traded in the aftermarket has added to the apprehension. Managing the disparity between the underlying asset value and market price is crucial for ETFs, and with limited trading of underlying assets after regular hours, determining fair prices becomes challenging. If the exchange does not provide iNAV, liquidity providers will need to independently calculate fair values and submit bids. The asset management sector has expressed worries that a widening gap between ETF prices and actual values during low liquidity periods could increase investor protection risks.
The Korea Exchange finds itself in a difficult position. Its competitor, Nextrade, plans to expand its trading offerings to include ETFs by the end of the year. If the aftermarket ETF trading fails in September, the exchange risks losing the opportunity to dominate after-hours trading in ETF products.
The challenges do not end there. Earlier this year, the Korea Exchange had announced plans to implement a 12-hour trading system starting June 29, with a pre-market from 7 to 8 a.m. and an aftermarket from 4 to 8 p.m. However, due to opposition from the securities industry labor union and concerns from the sector, the implementation was postponed to September 14, and in June, the pre-market launch was pushed back to the end of next year.
Industry insiders are now questioning the feasibility of the vision presented by Jeong Eun-bo, chairman of the Korea Exchange, for a 24-hour trading system by the end of 2027. With the pre-market delayed until next year, there are doubts about whether the original timeline for achieving a 24-hour trading system can still be met. The initiative to extend trading hours, aimed at enhancing global competitiveness, appears to be stalling due to insufficient preparation and consensus among market participants.
* This article has been translated by AI.
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