NEXTRADE (NXT) will strengthen volatility-curbing mechanisms to prevent sharp price swings in the premarket. It will newly introduce a static volatility interruption (VI) and change the trading method so that when a dynamic or static VI is triggered, orders are collected for 2 minutes and the price is set with a single-price auction.
NEXTRADE (NXT) said on the 31st it revised its business rules accordingly and will implement them starting on the 14th of next month.
Currently, NXT applies only the dynamic VI, which activates when the share price moves sharply from the last traded price due to a specific quote. When the dynamic VI is triggered, transactions pause for 2 minutes and then resume with continuous trading.
Going forward, a static VI will also be introduced. It activates when an issue's price rises or falls by 10% or more from the previous single-price auction price or the reference price. In particular, if the initial premarket price is set to deviate by 10% or more from the previous day's closing price, the system will not execute immediately; instead, it will collect orders for 2 minutes and set the price with a single-price auction.
The handling of a dynamic VI trigger will also change. For KOSPI 200 issues, the dynamic VI activates when the price moves ±3% from the last traded price, and for other issues at ±6% or more. Going forward, instead of immediately returning to continuous trading after the halt, trading will proceed with a 2-minute single-price auction, the same as the static VI.
The reform follows a spate of recent cases in the premarket where the opening price swung sharply on small orders. On the 6th, SK hynix traded 11 shares at 1,168,000 won in the minutes after the premarket opened, 29.98% below the prior regular session close.
On the 28th, just one share was executed at the lower limit of 1,272,000 won, and that price was reflected as the underlying price of overseas crypto-asset derivatives, causing the liquidation of a long position of about 80 billion won.
The NXT premarket operates from 8 a.m. to 8:50 a.m. in a continuous trading format. Because orders execute immediately when buy and sell conditions match, there have been concerns that with insufficient quotes piled up at the open, even small orders can heavily influence the initial price.
An NEXTRADE (NXT) official said, "If the initial premarket price rises or falls by 10% or more from the previous day's close, it will not execute immediately; orders will be collected for 2 minutes and the price will be set through a single-price auction," adding, "Situations where a small number of orders set the initial price at the upper or lower limit are expected to be prevented."
The method of resuming trading after a trading halt due to a circuit breaker (CB) or disclosures of material information will also change. Going forward, after the exchange's order-collection period for the single-price auction ends, orders will be gathered for an additional 30 seconds and the price will be set by a single-price method.
Separately, NEXTRADE (NXT) also plans to pursue a measure to determine the premarket's initial price itself through a single-price auction.