After about a yearlong suspension following last year's unilateral notice of a trading halt by a U.S. alternative trading system (ATS), daytime trading of U.S. stocks will resume in stages starting in November. Financial authorities said they would put in place a response system to prevent a repeat of the incident.
The Financial Supervisory Service said on the 24th that it had prepared consumer protection measures, including consolidation of order lines with two or more ATSs, to resume daytime transactions of U.S. stocks.
The FSS said it would guide the establishment of safeguards to protect investors in connection with the resumption of daytime transactions. Since this year, as Moon and Bruce, ATSs other than Blue Ocean Technologies, have begun local nighttime trading services, the number of ATSs capable of providing domestic daytime trading services has increased. Accordingly, the line consolidation standard was expanded from the existing one to two or more so that there would be no problem with transactions even if an issue arises at a single broker.
They also plan to build a rollback system to minimize the time needed to restore investor balances in the event of a trading failure. Since August, they have been conducting checks on the stability of new ATS consolidation, including mock tests in each securities firm's live trading environment.
In addition, they plan to require advance notices of transaction risks and set standards for establishing compensation systems at securities firms. They also intend to establish response manuals, such as setting up an emergency contact network with local U.S. ATSs for swift response in the event of an incident.
The FSS said, "We will guide the thorough verification of the industry's readiness so that daytime transaction services can resume smoothly," adding, "If a large-scale IT incident occurs due to poor internal controls after transactions resume, we will take stern action in accordance with laws and principles."
Daytime trading of U.S. stocks was suspended after the Black Monday (stock market crash) on Aug. 5 last year, when global stock markets plunged. Nineteen domestic securities firms had been conducting daytime transactions through Blue Ocean Technologies (Blue Ocean), a U.S. ATS, but as order volumes surged, Blue Ocean notified them of a trading halt.
As a result, transaction requests totaling 630 billion won received through about 90,000 accounts of domestic investors were canceled at once. Since then, daytime trading services for U.S. stocks have remained suspended.
The Korea Financial Investment Association has since discussed plans with securities firms to resume daytime transactions. After compiling opinions that daytime transactions should resume and delivering them to the FSS, it was decided that transactions would resume starting in November.