Nextrade will temporarily ban limit-up and limit-down orders in its pre-market from Aug. 12 after repeated cases in which extreme prices were executed on small orders. From Sept. 14 it plans to additionally introduce a static volatility interruption (VI) mechanism to reduce sharp price swings.

Nextrade on Aug. 7 announced the measures in connection with recent cases in which some stocks, including SK Hynix, were executed at limit-up or limit-down prices in the pre-market on small orders.

In Nextrade's pre-market, 1 share of SK Hynix was executed at the limit-down price on July 28. On Aug. 5, Samsung Electro-Mechanics and Alteogen were each traded at the limit-up price for 1 share. On Aug. 6, 11 shares of SK Hynix were executed at the limit-down price.

Nextrade explained that some of the limit-up and limit-down executions are believed to have resulted from errors in the order-processing process.

Nextrade is a multilateral trading facility, not a regular exchange under the Capital Markets Act. It operates a continuous auction system that continually executes trades starting with the earliest received order among executable quotes.

Because liquidity is relatively low in the pre- and after-market, it restricts market orders that can amplify price swings and allows only limit orders.

It also decided to temporarily ban limit-up and limit-down orders in the pre-market from Aug. 12 until Sept. 14, when the static VI system is introduced. The step aims to reduce cases of extreme-price executions caused by order errors.

From Sept. 14, it will add static VI to the existing dynamic VI. Under static VI, if an order is received at a price that has moved 10 percent or more from the previous day's reference price, it will not be executed immediately and the market will switch to a single-price auction.

The way VI is triggered will also change. Previously, trading was halted when VI was triggered, but going forward it will run a 2-minute single-price auction to calculate an equilibrium price before resuming trading, to encourage price stability. It is currently conducting tests by securities firms.

Nextrade plans to monitor for abnormal signs of sharp price rises and falls using limit-up and limit-down orders and to cooperate with financial authorities.