The Jackpot Opportunity vs. Volatility Trap: All-Stock Trading Battle Begins After Work

From Today: After-Market Stock Trading Begins

Expanding Trading Opportunities and Responding to Global Liquidity Competition

Concerns About Increased Price Volatility Due to Liquidity Dispersion

The Korea Exchange will open an after-market on the 14th, allowing stock trading even after the regular trading session has closed. To expand trading opportunities for investors and compete with major global exchanges in terms of liquidity, the Exchange will abolish the existing after-hours single-price auction and introduce real-time trading after market close.

Korea Exchange will open an after-market for stock trading even after the regular trading session closes on the 14th. Getty Images

However, some point out that there are significant challenges the Exchange needs to address, such as increased stock price volatility due to liquidity dispersion, greater fatigue for investors and securities industry workers, and the exclusion of exchange-traded funds (ETFs) from after-market trading.

After-Market Operation by the Exchange Starts Today

Starting today, the Exchange will operate the after-market for KOSPI and KOSDAQ from 4:00 p.m. to 8:00 p.m. After the regular session (9:00 a.m. to 3:30 p.m.) ends, a 30-minute after-hours closing price auction will take place, followed by the opening of the after-market at 4:00 p.m.

As a result, the after-hours single-price auction, previously held from 4:00 p.m. to 6:00 p.m., will be discontinued. In the auction, orders were collected every 10 minutes and executed at a single price. However, in the after-market, orders are matched in real-time using the same continuous trading method as during the regular session. For investors, this makes stock trading much more convenient. Only limit, best limit, and market-to-limit orders will be accepted, while market orders are not permitted.

Unlike NextTrade (NXT), an alternative trading system where only a limited number of stocks can be traded, all KOSPI and KOSDAQ stocks will now be tradable after the regular market session ends. Currently, about 600 stocks are traded on the NextTrade after-market (from 3:40 p.m. to 8:00 p.m.).

The Exchange explained that it established the after-market to respond to liquidity competition with major U.S. exchanges and expand trading opportunities for investors. The New York Stock Exchange (NYSE) and Nasdaq have both announced plans to extend their daily trading hours from 16 to 23 hours to accommodate Asian investors.

An Exchange official stated, "With extended trading hours, investors can now immediately reflect post-session information in prices, allowing for quicker investment decisions," adding, "Enhancing investor accessibility and market competitiveness will be an important first step for our market to reach a global standard."

Concerns Over Increased Price Volatility Due to Liquidity Dispersion

Despite high expectations, there are also concerns. Originally, the Exchange planned to launch both a pre-market session and the after-market simultaneously, but delayed the pre-market due to fears that the workload for securities firms would surge. The National Financial Industry Labor Union’s Securities Sector Division opposed the extension of trading hours and continued protests in front of the Exchange in Yeouido, Seoul. The Exchange is seeking to establish pre-market trading and even 24-hour trading like major U.S. exchanges, but from the perspective of securities firms facing increased workloads, the changes have not been welcomed.

It is also regrettable that ETFs and exchange-traded notes (ETNs) have been excluded from after-market trading out of concerns over increased market volatility. With the recent rise in individual investor participation in ETF investment, the inability to trade related products after market close is cited as an issue to be resolved by the Exchange.

Additionally, addressing the risks of liquidity dispersion and heightened price volatility due to low trading volumes also remains a challenge. The Korea Capital Market Institute warned that if trading volumes do not increase sufficiently after the after-market opens, liquidity could be dispersed across trading hours and price stability during the night session could deteriorate.

Yeo Millim, Senior Research Fellow at the Korea Capital Market Institute, said, "During time slots when participation by investors and market makers is low, the bid-ask spread could widen and the impact of a small number of orders on prices could grow," and added, "The gap between closing prices of the regular session and after-market could widen, or the extended session prices could distort the next day’s regular session prices."

This content was produced with the assistance of AI translation services.