After more than a yearlong halt, South Korean securities firms will resume daytime trading of US stocks starting in November, according to the Financial Supervisory Service on Wednesday.
Previously, Korean investors were able to trade US stocks during daytime hours in Korea -- corresponding to nighttime trading hours in the US -- through the US alternative trading platform Blue Ocean. However, trading was suspended following a major server outage in August 2024, which led to the cancellation of orders worth 630 billion won ($450 million) across 90,000 accounts here.
Following the incident, brokerage houses and the Korea Financial Investment Association, representing the firms, demanded that platform operator Blue Ocean Technologies come up with compensation plans and measures to prevent a recurrence.
Blue Ocean Technologies responded with a server migration and new investor protection measures.
Also, two new platforms offering trading sessions during daytime hours here, Moon ATS and Bruce ATS, were launched during the period of the suspension.
In light of the change, local securities firms plan to resume daytime trading of US shares from the first week of November. Trading will resume gradually, starting with brokerages that have preparations in place.
The FSS has given the regulatory nod to the resumption on the condition that securities firms implement thorough measures to protect investors.
Firms will be required to connect their order systems to at least two brokers or alternative trading systems. The redundancy will ensure trading continuity even if one ATS or broker encounters technical issues, the FSS explained.
In addition, a rollback system must be in place to automatically cancel orders and restore accounts immediately in the event of a system failure. The measure comes after some securities firms failed to complete rollbacks before regular trading hours during the server shutdown that happened last year.
Securities firms must also conduct thorough prechecks of the entire trading process, from order reception to settlement, including the stability of ATS connections.
Investors must be fully informed of the risks associated with daytime trading, such as lower liquidity, a limited number of market participants and the possibility of order cancellations. Compensation and contingency procedures must also be established.
According to the FSS, securities firms have been conducting live mock trading tests since August to ensure a smooth resumption of services.
“Investor protection remains our top priority, and we will closely monitor the resumption of daytime trading services to ensure stability,” an FSS official said.
“If any major incidents occur due to inadequate internal controls after the resumption, we will take strict action in accordance with laws and regulations.”
silverstar@heraldcorp.com
