[DigitalToday reporter Oh Sang-yup (오상엽)] Competition in stock trading after the regular session is set to intensify as the Korea Exchange opens an after-market.

The Korea Exchange said on Sept. 14 that it will operate an after-market for the KOSPI and Kosdaq from 4 p.m. to 8 p.m. starting that day. It will abolish the after-hours single-price session, which previously collected orders in 10-minute batches from 4 p.m. to 6:10 p.m., and switch to continuous trading that executes in real time when bid and offer conditions match. A total of 38 securities firms plan to participate in the after-market.

Nextrade currently operates an after-market from 3:40 p.m. to 8 p.m. From 4 p.m., real-time post-close trading will take place simultaneously in the two markets. The exchange had initially pushed to open pre-market and after-market sessions at the end of June, but adjusted the schedule to open the after-market first after reflecting industry feedback.

The exchange cited the range of tradable securities as a strength. Investors can trade listed KOSPI and Kosdaq shares and depository receipts (DRs), excluding some issues that require market management. Investors who hold securities that could not be traded on Nextrade will also be able to respond to disclosures or major news after the regular session ends.

Not all issues will be eligible. Issues that did not trade in the regular session on the day, managed issues, investment warning and risk issues, and issues under liquidation trading will be excluded. Exchange-traded funds (ETFs) and exchange-traded notes (ETNs) were also excluded from trading, taking into account concerns such as market volatility.

The exchange plans to discuss when to introduce ETF and ETN trading after checking the market stability and liquidity of the underlying shares and collecting industry opinions.

On Nextrade, off-hours trading already accounts for a substantial share. According to the industry, after-market trading accounted for 21.30 percent of Nextrade's total trading value from Sept. 1 to 10. The share was 22.86 percent last month, up 6.16 percentage points from 16.70 percent in February.

From Sept. 1 to 10, the combined share of trading value in the pre-market and after-market was tallied at 41.34 percent. Over the same period, the after-market accounted for 19.34 percent of trading volume, and the combined share of pre-market and after-market volume was 43.35 percent. That means a significant portion of Nextrade's internal trading takes place before and after the regular session.

Nextrade highlights trading costs as a competitive edge. Its trade execution fees charged to securities firms are 20 to 40 percent lower than those of the Korea Exchange.

For issues traded in common across the two markets, the allocation of orders by securities firms becomes more important. If an investor does not designate a specific market, a securities firm submits the order to a more advantageous market based on best execution standards, considering factors such as the likelihood of execution and the total transaction amount. Whether a sufficient quantity can be traded at the desired price, along with lower fees, also becomes a competitive factor.

Securities firms have also moved to attract customers for after-market trading. Korea Investment & Securities is running an event through Sept. 30 that pays 2,000 won per day in after-market investment support funds to the first 3,000 Bankis customers.

Daishin Securities has also prepared a weekly lottery event that pays 50,000 won each to 200 after-market trading customers. Other securities firms are also expected to gradually join by expanding events and services to secure customers and invigorate trading.

The exchange is also applying measures to prevent sharp price swings in the after-market. It will restrict market orders and allow only limit orders, best limit orders and most favorable limit orders. It will apply the same price limits as the regular session, at plus or minus 30 percent from the previous day's closing price, and will operate a volatility interruption (VI) mechanism and an after-market-only market-making system.

The disclosure submission window will remain from 7:30 a.m. to 6 p.m. Even after disclosures close, trading can be suspended in the after-market if grounds for a trading halt, such as bankruptcy or embezzlement and breach of trust, are confirmed.

The Korea Exchange said, "Investors can make prompt investment decisions by immediately reflecting information that occurs after the regular session ends in prices as trading hours are extended." It said it will "continue to monitor trends in trading hour extensions at global exchanges and review a phased extension of trading hours in the future."