South Korea's Nextrade to Ban Price Limit Orders in Pre-Market After SK Hynix Drop

The alternative trading exchange Nextrade announced it will temporarily prohibit upper and lower price limit orders during its pre-market trading session. This decision comes after SK Hynix shares experienced a significant drop, hitting the lower price limit, which raised concerns about market distortion due to price illusions.

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We will prohibit upper and lower price limit orders in the pre-market until the static VI system is introduced.

The pre-market session, which runs from 8:00 AM to 8:50 AM, has less liquidity than the regular trading hours. Unlike the regular session, it uses an immediate matching system for buy and sell orders, which can lead to similar incidents. Previously, SK Hynix shares fell 29.98% in the pre-market on June 6, and a similar incident occurred on May 28. Other stocks like Samsung Electro-Mechanics and Alteogen also saw price fluctuations on May 5.

Nextrade stated that some of these price limit executions were likely due to order processing errors. However, financial authorities have previously warned about speculative trading during pre-market hours, noting instances where specific accounts repeatedly submitted upper and lower price limit orders across multiple stocks. Such practices could distort market prices and mislead investors.

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Some of the upper and lower price limit executions were presumed to be errors during the order processing.

To address these issues, Nextrade will introduce a static VI system on July 14. This system will convert orders that deviate by more than 10% from the previous day's closing price into a single-price auction, allowing for a balanced price calculation before resuming trading. The current ban on price limit orders will remain in effect until this new system is implemented.

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Repeatedly submitting upper and lower price limit orders for multiple stocks from a specific account has been observed.