The Korea Exchange is moving to exclude exchange-traded products (ETPs) from its after-market, which is set to open on the 14th of next month. The prospect of buying and selling ETFs on the subway ride home appears unlikely for the time being.
According to the financial investment industry on the 27th, South Korea’s financial authorities and the exchange are working to include ETPs on the list of products ineligible for trading under the revised implementation rules for the after-market launch. If finalized, all ETPs—including exchange-traded funds (ETFs) and exchange-traded notes (ETNs)—will be barred from after-market trading.
The Korea Exchange is in the final stages of preparation for the after-market, which will operate from 4 p.m. to 8 p.m. The exchange had originally planned to allow ETPs, including ETFs, to trade in the after-market. However, the plan appears to have been abandoned after single-stock leveraged and inverse ETFs based on Samsung Electronics and SK Hynix drew controversy for amplifying market volatility during the recent global semiconductor correction.
Industry observers suggest the revised rules could be announced within days. The after-market is a system designed to allow stock trading after the regular session closes, aimed at improving access for investors such as office workers who find it difficult to trade during regular market hours.
Concerns over high-risk derivative products lie at the heart of this decision. Single-stock leveraged and inverse ETFs are structured to track two times or negative one times the daily return of their underlying assets, and have faced criticism for potentially magnifying investor losses and amplifying market instability during volatile conditions. The surge in trading volume for these products during the semiconductor sell-off—and the concern that volatility could extend beyond regular trading hours—appears to have influenced the decision.
Individual stock trading in the after-market, however, will proceed as planned. The exchange is expected to soon announce the implementation rules, which will detail eligible securities, trading mechanisms, and price limit parameters for the after-market. “Even with ETPs excluded, the after-market will operate with a focus on individual stocks,” an industry source said. “The prevailing sentiment in the early stages is to prioritize market stability.”
The after-market launch has drawn attention as the first attempt to effectively extend trading hours in the South Korean stock market. Separate from the existing pre-close after-hours trading following the regular session (9 a.m. to 3:30 p.m.), the after-market will operate through a dedicated order acceptance and execution system. However, with ETPs now excluded, some assess that the after-market’s trading volume and pace of activation may be more limited than initially expected.
The exchange is reportedly focused on ensuring trading stability in the early stages of the after-market, with plans to review a phased expansion of eligible products based on market conditions. Accordingly, whether ETFs and other ETPs will eventually be included in the after-market remains open to future discussion, contingent on market volatility trends and the establishment of investor protection measures.