The Korea Exchange has launched an aftermarket that allows real-time stock trading from the close of regular trading until 8 p.m., starting September 14. This marks the first expansion of trading hours in a decade, following a 30-minute delay in the regular trading close in 2016. The exchange's entry into the nighttime trading market, previously dominated by the alternative exchange NextTrade (NXT), has established a competitive aftermarket system.
The most significant aspect of this move is the noticeable increase in options available to investors. Previously, investors had to wait until the next day to react to major disclosures or sudden changes in overseas markets after the regular trading session. Now, they can respond in real-time after work.
The number of tradable stocks has expanded to around 2,700, covering most KOSPI and KOSDAQ listed stocks, excluding those under trading warnings or in special trading arrangements. This is a substantial increase compared to NXT, which has been limited to handling about 600 stocks per quarter due to capital market regulations. With the addition of NXT, investors can now compare fees and execution possibilities in the same time frame, allowing them to choose the market that best suits their needs. The Securities Order Routing (SOR) system of brokerage firms supports this development, making the aftermarket launch a significant step in enhancing the competitive structure of the domestic stock market and benefiting investors.
However, the increased options also bring potential confusion that must be carefully addressed. One major concern is that the aftermarket operates during hours when trading is typically less active. In a low liquidity environment, a small number of orders can lead to abnormal price spikes or erroneous trades at prices far removed from actual value. While the exchange has applied the same price limits and volatility control measures as in regular trading, it remains to be seen whether these safeguards can adequately address the unique liquidity issues of nighttime trading. Particularly, with low participation from institutional investors, a surge in individual investor orders could distort prices, potentially impacting the opening prices of the next day's regular session.
The simultaneous operation of the exchange and NXT during the same hours introduces another variable. If there are slight differences in trading rules or execution methods between the two markets, investors may place orders without fully understanding these differences, leading to unexpected outcomes. It is crucial to ensure that investors are adequately informed about specific rules, such as the fact that the aftermarket closing price is not recognized as the official closing price and that only limit orders are allowed, while market orders are not permitted. Even the best-designed systems can lead to confusion if users are not aware of these distinctions.
Prior to the launch, the exchange conducted a 23-week simulation market to test the system. However, real trading can differ significantly from simulations. In a market where actual funds are exchanged, unexpected trading anomalies or system errors can occur at any time. The exchange and financial authorities must closely monitor the initial trading data of the aftermarket to ensure there are no abnormal quotes or erroneous trades and that price discrepancies between the two markets do not widen excessively. While expanding investor options is a welcome advancement, maintaining the trust of the market and investors is of utmost importance.
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.