As the New York Stock Exchange (NYSE) prepares to enter the daily trading market, the calculations of the domestic securities industry have become complicated. Currently, the daily market service for U.S. stocks in South Korea has been suspended for eight months due to the order cancellation incident at the alternative trading system (ATS) Blue Ocean in August last year. For the domestic securities industry, which is reviewing the resumption of the service, signing a contract with a large institution like the NYSE could prevent a recurrence of order cancellation incidents like last year.
The problem is that the NYSE has only just started preparing for related business, which means more time is needed before a service contract can be established. Domestic securities firms are grappling with whether to choose stability, even if it is delayed, or to hastily resume services.
According to the financial investment industry on the 5th, the Korea Financial Investment Association recently discussed the NYSE and the weekly trading service for U.S. stocks. Afterward, the association is gathering opinions from 19 securities firms that previously provided the weekly trading service for U.S. stocks.
The U.S. stock weekly trading service allows domestic investors to consolidate trading orders of U.S. stocks received during South Korea's daytime hours. Since U.S. regular trading hours are from 10:30 p.m. to 5 a.m. the next day in South Korea, it has been popular among investors who find it difficult to trade stocks in real-time during these hours.
However, on the day when the global stock market crashed last August, Blue Ocean, which had a collaborative contract with domestic securities firms, unilaterally canceled Korean orders as it could not handle the surge in transaction volume. As a result, approximately 90,000 accounts from 19 securities firms that had a contract with Blue Ocean saw 630 billion won in transaction amounts canceled, and the restoration of accounts was delayed, causing many investors to incur losses. Since that incident, the weekly trading of U.S. stocks has not resumed in South Korea.
Domestic securities firms are preparing to resume the weekly trading service for U.S. stocks. Despite experiencing an unexpected incident last year, many investors still want this service. However, the eight-month period during which the service was halted has allowed for more options to be available to domestic securities firms, prolonging the industry's deliberations.
The U.S. stock weekly trading service is structured such that domestic securities firms enter into contracts with U.S. local exchanges to provide the service to investors. Until the order cancellation incidents occurred last year, Blue Ocean was the only firm authorized to conduct weekly trading by the U.S. Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA).
Recently, U.S. trading platform companies such as '24Exchange' and U.S. fintech firms like Apex have begun preparations to provide the weekly trading service for U.S. stocks. In the case of 24Exchange, it is a trading platform that has received formal approval from the SEC.
Moreover, the regular exchange, the New York Stock Exchange, is also preparing to enter this market. The NYSE received approval from the SEC in February to extend its trading hours to 22 hours.
For domestic securities firms, it is a situation in which they must deliberate between stability and speed. In terms of stability, there are no rivals that can match a large regular exchange like the NYSE. The issue is that the NYSE has only been approved for extending trading hours by the SEC and has many steps to prepare.
A Korea Financial Investment Association official noted, 'There are questions about whether ATSs currently wanting to provide the weekly trading service for U.S. stocks can guarantee stability.' This official remarked, 'If we collaborate with the NYSE, there should be no issues regarding trading stability,' but added, 'The dilemma is whether to start the weekly trading service for U.S. stocks through the ATS, accepting instability, or to wait until the NYSE, a regular exchange, enters the market.'