It has been confirmed that so-called "blind trading" is occurring in weekly U.S. stock transactions, where investors must place orders without checking quotes. As Blue Ocean Technologies (Blue Ocean), a U.S. alternative trading system (ATS), halted quote dissemination for some tickers, an abnormal trading environment has formed in which transactions are executed but prices are unknown.
According to the financial investment industry on the 9th, Blue Ocean recently suspended quote provision and trading transactions for 31 tickers under U.S. Securities and Exchange Commission (SEC) rules. This is because it was subject to a transaction restriction rule that applies when it cannot capture at least 5% of average daily trading volume for four of the past six months. The number of tickers with trading halted increased by 13, from 18 in February this year to 31 this month.
When weekly U.S. transactions resumed in November last year after 1 year and 3 months, domestic securities firms signed multiple contracts with ATSs such as "Blue Sea" and "Moon," in addition to Blue Ocean, which had effectively monopolized existing weekly transactions, to protect investors.
This is a measure to prevent a recurrence of the Black Monday incident in Aug. 2024. At that time, Blue Ocean's unilateral trading halt forced the cancellation of orders worth 630 billion won at about 20 domestic securities firms. As a result, even if transactions through Blue Ocean are blocked, investors can trade through other ATSs.
However, reliance on Blue Ocean for quote information infrastructure remains overwhelming. Because Blue Ocean monopolizes more than 90% of weekly U.S. stock transactions by volume in Korea, securities firms did not sign separate quote-provision contracts with other ATSs with low market share to reduce expense. This is the same at major firms such as Samsung Securities and KB Securities, and it is known that, for now, no ATS other than Blue Ocean provides quotes in Korea.
Tickers currently without visible quotes include "Direxion Shares ETF Trust Daily MSCI South Korea Bull" (KORU), which tracks the Korean stock market three times; "MicroSectors Gold Miners 3X ETN" (GDXU), which tracks gold miners three times; and the 2x inverse bitcoin product "ProShares UltraShort Bitcoin ETF" (SBIT).
In particular, KORU and GDXU ranked as major investment tickers last month at No. 3 (about 314.9 billion won) and No. 10 (about 100.8 billion won), respectively, in net purchases by Korean retail investors trading U.S. stocks.
Given the situation, investors using weekly transactions are checking quotes by sharing execution prices through securities firm communities. Investors said, "How can we flip trades when the chart isn't visible?" and "You can buy, but it's frustrating because the price isn't visible."
From the securities firms' perspective, weekly transaction volume is smaller than during regular sessions, and there is a significant additional expense burden such as infrastructure maintenance and data fees if they receive quotes from multiple ATSs, which is a concern.
An official at a large securities firm said, "We keep Blue Ocean as the main venue and set up a structure to allow transactions through other ATSs in special situations," adding, "Receiving quotes from multiple ATSs is an expense burden, and for investor convenience we made sure that transactions in the relevant tickers are not blocked."
However, if the number of tickers for which Blue Ocean does not provide quotes increases going forward, investor inconvenience from the current blind trading limited to some tickers could grow. Also, as long as domestic securities firms maintain a structure that relies on quotes from a specific ATS, investors are likely to be repeatedly exposed to situations where they enter transactions without price information.
In this regard, some securities firms recently noted, "Depending on changes in trading volume, the tickers for which Blue Ocean does not provide quotes and halts trading may be added or removed," and "Quotes can be viewed normally when the premarket opens."