SEOUL, Jan. 31 (Korea Bizwire) — South Korea’s bourse operator said Tuesday it will push to open the derivative market earlier and allow for nighttime trading in the area as part of efforts to upgrade investment practices to global standards and reduce volatility.
Currently, derivative trading in South Korea starts at 9 a.m., the same time when the country’s stock markets open, unlike other major countries where derivative trading begins ahead of equity market trading.
Experts expect the opening time difference will reduce volatility in equity markets.
The Korea Exchange (KRX) said it will push to open the derivative market at 8:45 a.m., while at the same time seeking to allow for investment in the market at night.
Nighttime trading could reflect the impact of major events that could take place overnight in other countries and reduce overall volatility in the stock market the following day.
“We will swiftly respond to a fast-changing environment surrounding financial markets and push for well-designed action plans in a speedy manner,” Sohn Byung-doo, head of the KRX, said in a press briefing.
The plan is part of a series of steps that the KRX will push for this year in order to upgrade market proceedings to global standards.
They include providing more information about dividend payout and regulatory filings in English to foreign investors.
They are in line with the Financial Services Commission’s (FSC) report a day earlier to President Yoon Suk Yeol, briefing on its policy tasks for this year.
The FSC said it will seek to remove a decades-old system that requires foreigners to register their identities before investing in local stock, obligate listed firms to provide regulatory filings in English “in phases” and offer more information on dividend payout.
Those efforts are aimed at removing the “Korea discount” that refers to the relatively low valuation of Korean stocks due to such factors as the North Korea threat, weak corporate governance and complex regulations.
With regard to the introduction of alternative trading systems (ATSs) that would intensify competition with the main bourse, Sohn told reporters the KRX will continue to make efforts to stay ahead by providing “fast” and “convenient” service at “good prices” to its customers.
An ATS is a trading platform that will match buyers and sellers of securities, but without having authority over listing and market oversight roles that the KRX plays.
Its introduction is expected to increase competition with the KRX, and result in expanding the volume of transactions, reducing costs for customers, and improving services and overall market efficiency.
Local brokerages aim to launch the operation of an ATS in 2024.
“From a broad perspective, ATSs are not just partners but also competitors for sure to the KRX,” Sohn said. The KRX is the operator of the main Korea Composite Stock Price Index and tech-heavy KOSDAQ equity markets.
Meanwhile, he painted an optimistic picture for the initial public offering market this year after its slump caused by the overall gloomy stock market situations.