NXT Considers Introducing Pre-Market Opening Single Price Auction to Prevent “SK hynix One-Share Lower Limit” Incidents
Likely to Be Introduced in January Next Year
Alternative trading platform NextTrade (NXT) is reviewing the introduction of an “opening single price auction” to prevent abnormal price swings immediately after the opening of its pre-market. This move comes in response to repeated incidents of sharp price fluctuations at the start of trading, such as SK hynix hitting the lower limit with just a single share transaction.
According to the financial investment industry on August 28, NextTrade is seriously considering establishing the pre-market opening price using a single price auction method, with the goal of implementing it in January next year.
A single price auction is a method by which buy and sell orders are collected over a certain period and then matched all at once at a single price where the most trades can be executed.
Currently, the NextTrade pre-market operates from 8:00 a.m. until 8:50 a.m., ten minutes before the main session opens. The platform uses a continuous auction system, where transactions occur whenever bid and ask prices match.
Recently, in this continuous auction environment, there have been two instances where SK hynix shares opened at the lower limit price on the pre-market.
On the 28th of last month, immediately after the pre-market opened, one share of SK hynix was traded at the lower limit price of 1,272,000 won. This event triggered a chain reaction of losses amounting to tens of billions of won (over 80 billion won) in the virtual asset derivatives market.
Again, on the 6th of this month, right after the market opened, 11 shares were traded at 1,168,000 won, which was 29.98% lower than the previous regular session's closing price. Although a dynamic volatility mitigation mechanism was triggered and a single-price auction was applied for two minutes, confusion arose in the market.
From August 12, NextTrade temporarily banned upper and lower limit orders during the pre-market. This measure will remain in effect until September 14, when the introduction of a static volatility mitigation mechanism is scheduled. Even with the introduction of the new mitigation mechanism, concerns persist over price fluctuation in the pre-market, leading to calls for a single price auction as an alternative.
The introduction of the opening single price auction does not require separate approval from the financial authorities. However, since the method of market operation would change, NextTrade is reported to be consulting with the authorities regarding the matter.
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If the policy is finalized, both NextTrade and securities firms will need to modify their trading systems and conduct pre-launch testing. Details such as how many minutes orders will be accepted have not yet been determined.
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