KRX or NXT? A “Happy Dilemma” as After-Hours Trading Begins Today

[Financial News] Starting today, most stocks will be available for real-time trading from 4 p.m. to 8 p.m.
According to the Korea Exchange on the 14th, it will open an after-hours market for the KOSPI and KOSDAQ markets from 4 p.m. to 8 p.m. After regular trading runs from 9 a.m. to 3:30 p.m., after-hours closing-price trading will take place for 30 minutes. Real-time orders will then be executed in the after-hours market from 4 p.m. As a result, the existing single-price trading system, which operated from 4 p.m. to 6 p.m., will be abolished.
NextTrade (NXT) has operated an after-hours market since March last year, but securities that could not be traded there will also be available on the Korea Exchange’s after-hours market. Under the Enforcement Decree of the Capital Markets Act, alternative trading systems such as NXT may not account for more than 15% of the Korea Exchange’s average daily stock-trading volume over the previous six months. NXT rotates the securities eligible for trading each quarter, with roughly 600 stocks included at a time.
By contrast, the KRX after-hours market will allow trading in most KOSPI- and KOSDAQ-listed stocks, excluding certain securities requiring market management, such as investment-warning stocks and stocks undergoing liquidation trading. With 2,766 KOSPI- and KOSDAQ-listed securities currently available, investors will have a broader range of stocks to choose from. However, exchange-traded funds (ETFs) and exchange-traded notes (ETNs) have been excluded because of concerns that they could increase market volatility.
Market observers say the KRX’s after-hours market will expand investors’ choice of trading venues. Since both KRX and NXT will operate after-hours markets during the same period, from 4 p.m. to 8 p.m., investors can choose whichever venue they prefer.
When the after-hours sessions of KRX and NXT overlap, brokerages will submit orders to the venue most favorable to the investor under their best-execution standards if the investor does not designate a specific market. However, some believe the change will be limited from investors’ perspective because NextTrade already operates an after-hours market from 3:40 p.m. to 8 p.m. There are also concerns that, in the relatively thinly traded after-hours market, trades could be executed at abnormal quoted prices.
KRX plans to continue monitoring global exchanges’ moves to extend trading hours and consider expanding its own hours in stages. Next year, it plans to add a morning pre-market session and, over the longer term, establish a trading system operating close to 24 hours a day.
[email protected] Han Young-jun Reporter