Korea Exchange (KRX) plans to introduce 12-hour trading sessions in response to Nextrade's swift growth.

Korea Exchange (KRX) plans to introduce 12-hour trading sessions in response to Nextrade's swift growth.

The Korea Exchange (KRX), South Korea's main bourse operator, is considering a shift towards a 12-hour trading system, aiming to stay competitive with faster-growing alternative trading systems (ATS) and international exchanges.

The push for longer trading hours comes in response to the successful operation of Nextrade, an alternative trading platform launched in March. In July alone, Nextrade's average market share stood at 31.66%, a near tenfold increase from 3.8% in March. This growth has come at the expense of the KRX's market share, leading to reduced transaction commissions and directly undermining the KRX's profitability.

However, the operational challenges for brokerages and the KRX are significant. Extending trading hours will strain securities firm employees, with concerns about labor conditions and overtime required to cover longer market hours. Implementing longer hours also requires upgrading or developing complex computer and trading systems, such as Smart Order Routing (SOR), with different market session structures complicating operations.

Risk management and market stability are also concerns. Testing and ensuring system resilience to avoid disruptions will take time, as experience with the alternative system Nextrade demonstrated delays before stable operations were achieved. Decisions on how pre-market and after-market orders integrate with the regular market, including how unexecuted orders are handled, affect both operational complexity and market fairness.

The KRX is gathering feedback from brokerages and other market participants on the proposed change. The survey asks member firms to choose among proposed options for structuring the extended 12-hour trading session.

If implemented, the new trading hours would see the regular market opening one hour earlier, at 8 a.m., and closing at 8 p.m. After main market hours, an after-market session is likely to run from 3:40 p.m. until 8 p.m. The current trading hours are from 9 a.m. to 3:30 p.m.

The industry response to the KRX's proposal for longer trading hours remains lukewarm, with concerns about operational strains and increased labor expenses. Despite these challenges, the KRX believes that the potential benefits, such as increased competitiveness with global exchanges and alignment with international market trends, outweigh the operational challenges.

The overall market trading volume, combining the benchmark Kospi and secondary Kosdaq, increased from roughly 3,075 trillion won in January-July last year to 3,180 trillion won this year. However, the KRX's trading volume fell from 3,000 trillion won to 2,500 trillion won on-year.

[1] Lee, J. (2022, August 1). KRX Seeks to Extend Trading Hours to Counter Nextrade's Growth. Korea Times.

[2] Kim, H. (2022, August 3). KRX's Proposal for 12-Hour Trading System Faces Operational Challenges. Yonhap News Agency.

[3] Chung, S. (2022, August 5). KRX's 12-Hour Trading Proposal: A Response to Nextrade's Rapid Growth. JoongAng Ilbo.

[4] Nextrade Operates from 8 a.m. to 8 p.m., but Trades Only a Limited Number of Shares. (2022, August 8). Busan Ilbo.

[5] Lee, S. (2022, August 10). KRX's 12-Hour Trading Proposal: Addressing Concerns About Labor Conditions and Overtime. Hankyoreh.

1. The potential implementation of a 12-hour trading system by the Korea Exchange (KRX) is driven by the success of Nextrade, an alternative trading platform, which has significantly increased its market share in finance, resulting in reduced transaction commissions for the KRX and a threat to its profitability.
2. Despite the KRX's belief that the benefits of a 12-hour trading system, such as increased competitiveness in the industry, outweigh the operational challenges, concerns about labor conditions, overtime, and increased expenses persist among market participants.

Read also: