Lee Yeon-woo is a financial journalist at The Korea Times. Her wide range of reporting includes policies, macroeconomics, stock market, companies and even crypto. She is passionate about connecting the dots in Korean finance and making it easier for foreign nationals to understand. Based on her previous experience as a national reporter, she also has a keen interest in social issues within the sector, including gender equality and ESG. Your tips and insights are always appreciated. You can send them to yanu@koreatimes.co.kr.
Korean investors seek new brokers amid disruptions during US daytime trading halt
Stock prices are displayed on a screen of the Nasdaq MarketSite in New York, Wednesday. EPA-Yonhap
By Lee Yeon-woo
Industry competition to attract new clients heats up as market upheaval anticipated
A significant number of individual investors, who experienced disruptions and financial losses during the U.S. daytime trading halt, are now seeking to transfer their assets to different brokers. With overseas stock trading fees becoming a critical revenue stream, competition to attract new clients is intensifying.
"Resolution is going to take a long time. There's nothing more I can do, so I transferred my entire account (to another brokerage)," an investor who attempted daytime trading at NH Investment & Securities said on condition of anonymity.
"Even if 100 million won ($73,633) to 200 million won might not matter much to a brokerage firm, I believe if enough people do it, they'll have to take some kind of action."
He added: "After all, I've lost my faith in them."
He was referring to an incident on Aug. 5, when Blue Ocean — an alternative trading system (ATS) in the United States — abruptly notified domestic brokerage firms of the cancellation of all daytime orders placed after 2:45 p.m. This occurred due to an overwhelming influx of sell orders, as investors anticipated a U.S. market plunge following the crash of the Asian markets.
Domestic brokerage firms allow the trading of U.S. stocks from 9 a.m. to 4:30 p.m. (Korean time), in collaboration with Blue Ocean.
While brokerage firms sequentially canceled transactions, investors' accounts in NH Investment & Securities, Samsung Securities and KB Securities were frozen even after the regular market opened.
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Many investors claim they saw significant financial losses, as they were unable to trade in a timely manner during the market volatility. The Financial Supervisory Service reported that about 90,000 accounts and transactions worth a total of 630 billion won were canceled due to the halt.
Market watchers anticipate the incident could bring changes to the five leading securities firms in terms of overseas trading — Mirae Asset Securities, Samsung Securities, Kiwoom Securities, Toss Securities and Korea Investment & Securities.
Their fee incomes from overseas stock and bond trading recorded 112.5 billion won, 90.9 billion won, 77 billion won, 65.9 billion won and 49.2 billion won, respectively, during the first half of this year, according to the Korea Financial Investment Association. This marks an increase of around 1.5 times compared to the previous year.
The industry is competing fiercely to attract new customers in overseas trading.
Samsung Securities, for example, has introduced a promotion that provides new clients with up to $100 in support. In addition, U.S. stock online trading fees are waived for the first three months, followed by a reduced fee of 0.03 percent for the next nine months.
Similarly, Kiwoom Securities and Korea Investment & Securities are offering new clients cash investment credits and waiving trading fees for several months.
This battle for clients is expected to grow even more intense once daytime trading resumes. Starting Friday, the industry collectively decided to suspend the service until Blue Ocean’s system stability is restored.
"Disappointed by the stagnant domestic stock market, investors are increasingly turning to overseas markets. This will grow the market even larger in the future," an industry official said.
"While concerns about fierce competition persist, such as the zero commissions, the expanding market suggests that competition among brokerage firms will continue."