Korea Exchange (KRX) will introduce a "kill switch" rule for the bond market following the stock market. After the system failure that halted all KOSPI stock trading in Mar., it is expanding the scope of prevention and response to system failures.
According to the financial investment industry on the 22nd, Korea Exchange (KRX) recently created a basis in the detailed enforcement rules of the stock market business regulations for the bond market to cancel, by authority, orders that cause system failures, and streamlined the measures and methods for concluding trading contracts. It is currently collecting opinions from market participants and plans to implement it starting Feb. 9 next year.
Specifically, in the "measures and methods for concluding trading contracts in the event of a system failure" under the business regulations for transactions in debt securities, Korea Exchange (KRX) established new provisions allowing the following measures: ▲ cancel orders that caused the system failure ▲ suspend order reception or suspend transactions, and cancel unexecuted orders if necessary ▲ after the system failure is resolved, resume order reception or transactions from the time set by the exchange.
In cases of an order surge, measures to suspend transactions and cancel unexecuted orders were added, the same as for a system failure. Most of the revisions are identical to the stock market system failure prevention amendment that will take effect in Jan. next year.
Starting Jan. 12 next year, Korea Exchange (KRX) will be able to cancel, by authority, orders that raise concerns of a system failure due to an order surge in the stock, KOSDAQ, and KONEX markets, and, if necessary, suspend transactions. In the event of a failure, unexecuted balances will also be canceled in bulk.
The most recent major system failure in the bond market occurred on Nov. 2, 2021. At the time, a failure occurred in the network hardware equipment (router) of the Government Bonds specialist trading market (KTS), preventing orders from being reflected, and some bond transactions were halted for about 50 minutes. However, since orders did not flow in at all, there was no related damage.
Since then, there have been no notable system failures in the bond market, but Korea Exchange (KRX) is seen to have greatly expanded the scope of by-authority cancellations from the stock market to the bond market to speed up responses to system errors and handle incidents more efficiently.
In fact, after an execution error involving DONG YANG STEEL PIPE in Mar. caused a complete halt of all KOSPI stock transactions for 7 minutes this year, Korea Exchange (KRX) pledged measures to prevent a recurrence of system failures. It is evaluated to have focused on stabilizing the system to that end.
A Korea Exchange (KRX) official said, "As a response after the March system incident, revisions such as by-authority cancellations were introduced, and we are applying them uniformly from the stock market to other markets," adding, "The bond market, too, has accordingly been notified of the new amendment."