South Korea to exclude ETFs from after-hours trading

The Korea Exchange is poised to exclude Exchange Traded Funds (ETFs) and Exchange Traded Notes (ETNs) from its upcoming after-hours trading session, scheduled to open on September 14. This move, detailed in an upcoming revision of the relevant enforcement rules, signals a cautious approach by financial authorities and the exchange.

Initially, the exchange had prepared to allow ETF trading during the extended hours, which run from 4 p.m. to 8 p.m. However, growing concerns about market volatility, particularly driven by single-stock leveraged ETFs, have prompted a reconsideration. The asset management industry also raised concerns about the operational burdens associated with managing prices and staffing for extended trading hours.

Financial authorities share this cautious stance. Given the recent significant market fluctuations, especially with leveraged ETFs, they believe a thorough review of the impact of extended trading hours on investor protection and market stability is necessary before allowing ETF trading. The operational strain on asset managers and liquidity providers (LPs) is also a factor, as they would need to allocate additional staff to manage prices and quotes until 8 p.m.

Consequently, the plan is to launch the after-hours market initially focusing on stocks. The inclusion of ETPs like ETFs and ETNs will be re-evaluated later, pending further assessment of market conditions and the development of related infrastructure. The industry anticipates the official announcement regarding the exclusion of ETPs from the after-hours session within days.