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Korean brokerages to resume US daytime stock trading in November with stronger safeguards
Financial Supervisory Service headquarters in Seoul / Korea Times file
By Jun Ji-hye
Korean brokerages will restart their suspended daytime trading service for U.S. stocks in November, after the program was put on hold in August last year, industry and government officials said Wednesday.
The Financial Supervisory Service (FSS), the country’s financial watchdog, said it will ensure that adequate safeguards are in place to protect investors before the relaunch, while also vowing strict measures in the event of any large-scale system failures.
The service allows local investors to buy and sell U.S. stocks during Korea’s daytime hours.
Introduced by Samsung Securities in February 2022, it was later expanded to 18 brokerages, with all transactions processed through Blue Ocean ATS (alternative trading system), which is operated by New York-based fintech company Blue Ocean Technologies.
However, Blue Ocean ATS experienced a system malfunction on Aug. 5 last year, which came to be known as Black Monday, resulting in the unilateral cancellation of investor orders. Following the incident, Korean brokerages collectively decided to suspend the service on Aug. 16.
“After the mass order cancellation at Blue Ocean ATS, securities firms and the Korea Financial Investment Association worked together to identify the cause and review the resumption of daytime trading,” an FSS official said. “On the condition that multiple alternative trading systems are used, it has been agreed that the long-suspended U.S. stock daytime trading service will be gradually reinstated starting in November.”
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The FSS emphasized that brokerages planning to restart the daytime trading service must link their order systems to at least two U.S. brokers and alternative trading platforms to enhance trading stability.
The companies will also implement rollback systems to minimize the time required to restore investor balances in case of errors or system disruptions.
Currently, each firm is conducting simulated tests using a pre-inspection checklist to ensure the reliability of connections to the new alternative trading systems.
The financial watchdog also plans to strengthen pre-trade notifications so that investors are fully aware of the potential risks of daytime trading.
The agency has directed brokerages to establish clear compensation guidelines and procedures for any losses caused by system errors and to develop detailed response manuals covering various types of disruptions.
“In coordination with the industry, we will closely review brokerages’ preparations to ensure a smooth resumption of the daytime trading service,” the FSS official said. “If a major system failure occurs after the relaunch due to insufficient internal controls, strict measures will be enforced in accordance with regulations and established principles.”