First all-stock suspension since 2005 follows system error amid alternative trading exchange rollout
South Korea's main bourse, Kospi, experienced a brief trading suspension on Tuesday, with the Korea Exchange attributing the issue to a technical glitch triggered by a newly introduced function.
Trading on the Kospi market was halted for seven minutes starting at 11:37 a.m., during which brokerages were unable to retrieve quotes or process orders. This marked the first time since the Korea Exchange's launch in 2005 that all Kospi-listed stocks were suspended.
The suspension was caused by a system malfunction during the trading of Dongyang Steel Pipe, a local steel pipe manufacturer, which saw a surge in transaction volume amid a broader rally in the steel sector.
According to the KRX, the issue stemmed from a technical error related to a new price-setting method, "mid-price quoting," which conflicted with an existing method, causing delays in transaction executions.
The method, which sets the order price at the midpoint between the best bid and ask prices, was introduced with the launch of Korea's first alternative trading system, Nextrade, on March 4. To align with Nextrade, KRX also adopted this feature, along with other new quoting methods, on the same day.
Normal trading resumed at 11:44 a.m. for all stocks except Dongyang Steel Pipe, which remained halted until 3 p.m. while the exchange identified and resolved the issue.
The tech-focused secondary bourses, Kosdaq, and trading on Nextrade did not experience disruptions.
Investors in Dongyang Steel Pipe voiced frustration after being unable to execute trades, particularly as the stock had surged nearly 20 percent before the suspension and gained further after trading resumed at 3 p.m., closing at the daily price limit of 1,119 won ($0.77), up 29.97 percent.
Seoul-based market expert Yi Junesuh noted that, while the recent error was not directly caused by Nextrade, its introduction may have pressured the KRX into hasty decisions.
"Alternative systems have their merits in driving market progress through competition and addressing investor needs, but they require thorough testing to integrate with the existing system," said Yi, a business administration professor at Dongguk University. "It seems the KRX may have been pressured by Nextrade's launch to implement changes before the system was fully prepared."
Yi dismissed concerns that Nextrade's growing presence itself would undermine system stability. The alternative exchange is set to expand the number of tradable stocks during the premarket and aftermarket hours to 800 from the current 110 by the end of this month, with some suggesting that the rapid pace of stock additions may overwhelm the system.
"Although trading volume will increase with the addition of new stocks, the existing system should be able to handle it," the professor added.
To prevent any future disruptions with the addition of stocks on Nextrade, KRX plans to conduct joint inspections with the alternative exchange operator every weekend until the end of April to prevent similar issues.
jwc@heraldcorp.com
