Extending Korea Exchange's trading hours to 24 hours is necessary to respond to global competition, but there were concerns that, given the characteristics of the domestic securities market, side effects could emerge unless high liquidity is secured. In this process, some also said it is necessary to enhance the investment appeal of domestically listed companies and to adopt investor protection measures.
At the "The new future of the Korean capital market" session of the "Korea Capital Market Conference" hosted by Korea Exchange at the Westin Josun Hotel in Seoul on the 29th, participants discussed extending trading hours in the domestic securities market and ways to continuously boost corporate value, based on the status of Nasdaq's push for a 24-hour trading system.
Lee Seong-bok, senior research fellow at the Korea Capital Market Institute, said of Korea Exchange's push to extend trading hours, "Not only Nasdaq but also the London Stock Exchange in the United Kingdom is reviewing a 24-hour extension from multiple angles," adding, "By attracting additional overseas investors and providing additional trading opportunities for individual investors, it can ultimately improve the efficiency of the stock market and enhance the price discovery function."
However, there are side effects from extending trading hours. As hours increase, liquidity in the market disperses by time band, and price distortions can occur. There is also a risk that market trust will fall if unfair transactions are not thoroughly monitored.
Regarding this, Nasdaq in the United States, which plans to start 24-hour trading in the second half of next year, said its goal is to resolve liquidity dilution and volatility in the price discovery process and to grow valuation (corporate value) to maintain Nasdaq's credibility.
Garrick Stavrovich, head of data products at Nasdaq in the United States, said, "For the success of 24-hour trading, we have launched dedicated working groups for each segment, including asset managers, individuals, and institutions." He added, "Rather than simply extending hours, we will expand market access to all investors to provide more investment opportunities."
It was pointed out that the liquidity issue in Korea's securities market—where most trading occurs during regular trading hours—also raises entry barriers for overseas investors even with extended hours.
Vikesh Kotecha, head of Asia-Pacific at Citadel Securities, said during the panel discussion, "Before introducing 24-hour trading, Korea's securities market must increase liquidity for overseas investors to come in," stressing in particular that securing liquidity providers (market makers) who can trade in extended time bands is crucial. He added, "If high liquidity and optimal pricing for investors are achieved even after extending hours, the share of overseas investors will also increase."
Research fellow Lee also voiced concern, saying, "If a 24-hour trading system is adopted worldwide, time-zone effects will disappear and an infinite competition for global liquidity will begin," and "In the worst case, if there is no new inflow of overseas investors, liquidity could concentrate in just one market." He noted that Korea Exchange needs to consider how to newly attract global liquidity.
To mitigate the side effects of extending trading hours, it is essential to classify issues traded in the pre- and after-market and to ensure regulatory transparency through market measures. Stavrovich emphasized, "It may be difficult to operate the KOSPI on a 24-hour basis right away," adding, "What matters most, given that various variables can emerge during the extension process, is establishing investor protection measures."
On this, Korea Exchange said it is necessary to respond to the liquidity competition among global exchanges and the competition with alternative trading systems (ATS) that emerged anew this year.
Song Gi-myeong, deputy head of the Korea Exchange KOSPI Market Division, said, "The concern over extending trading hours is like asking whether a restaurant will do well if only its business hours are extended when the food is not tasty," adding, "The exchange is also improving government and capital market systems to raise the investment appeal of listed companies, and separately, it is necessary to scale up the hardware of extended trading hours."
Song said, "If tokenization of stocks, bonds, and exchange-traded funds (ETFs) proceeds overseas going forward, it could pose a potential threat of liquidity outflow," adding, "In this respect, Korea Exchange is focusing on blockchain, the technology underlying virtual assets."
He added, "In the short term, building a 24-hour trading system is not easy, so I think it is desirable to operate on a 12-hour system first, like an ATS, and then transition to a 24-hour system, considering liquidity and efficiency."