Preventing SK hynix Single Share from Hitting the Lower Limit... NextTrade to Introduce Static VI and Single-Price Auction
Recently, following two incidents where the initial price of SK hynix hit the lower price limit, NextTrade (NXT) has decided to introduce an additional "Static Volatility Interruption (VI)" as well as a single-price auction system.
On August 31, NextTrade announced via a press release, "We have revised our business rules to introduce static VI and change the transaction method to a single-price auction when static or dynamic VI is triggered. These changes will take effect from September 14."
Currently, NextTrade employs a dynamic VI, which is activated when a significant price fluctuation occurs due to certain quotes. When the dynamic VI is triggered, trading is suspended for two minutes for the relevant security. However, the static VI has not yet been introduced; as a result, there have been cases where the initial price in the pre-market was set at the upper or lower price limit due to small-volume orders.
The static VI will be triggered if the price of a particular stock rises or falls by more than 10% compared to the price determined by the most recent single-price auction (or the reference price if such a price does not exist). Additionally, starting from September 14, when either a dynamic or static VI is triggered, instead of resuming continuous trading after the suspension, price determination will be switched to a single-price auction by aggregating orders for two minutes.
If the initial price in the pre-market rises or falls by more than 10% compared to the previous day's closing price (the reference price), the transaction will not be executed immediately. Instead, orders will be aggregated for two minutes and the price will be determined via a single-price auction, thereby preventing the initial price in the pre-market from being set at the upper or lower limit due to small-volume orders.
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NextTrade stated, "In addition to expanding the scope of single-price auctions through this amendment of trading rules, we will also pursue other measures such as determining the initial price in the pre-market through a single-price auction in order to mitigate market volatility and become a trusted market suitable for quantitative growth."
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