The recently opened alternative trading system (ATS) “NextTrade (NXT)” displays ten trading stocks on a monitor at its office, opened on the 4th. [Yonhap]
[Herald Economic News = Reporter Jeong Yoon-hee] Recently, there have been occurrences of sharp stock price fluctuations during the pre-market trading (8:00 am – 8:50 am) at the alternative trading system (ATS) NextTrade. The financial authorities have urged investors to exercise caution.
The Financial Supervisory Service stated on the 27th, “During pre-market trading on the alternative trading system, price illusions may lead to follow-up trades, which can result in unforeseen losses. Therefore, we urge investors to refrain from mimicking trades and be cautious of follow-up trading.”
According to the financial authorities, recently, right after the start of pre-market trading, the initial price is established at the upper or lower price limit with only a small number of single stock orders. After this, there is no change in market price for a certain period. Then, during the process of prices returning to normal, there are sharp price fluctuations.
pre-market has less liquidity compared to the regular market and determines the initial price through a quote-driven market rather than a single-price auction.
In many cases, it appears that orders are made by investors who are not yet familiar with how the pre-market opening price is decided.
The financial authorities are examining cases where certain accounts repeatedly submit upper or lower price limit orders for multiple stocks.
The Financial Supervisory Service emphasized, “Even small orders that may unjustly influence the market price are subject to market monitoring. Severe cases could be punished as market disorderly conduct or price manipulation.”
They added, “The formation of upper and lower price limits due to pre-market single stock trades could potentially lead to temporary sharp price fluctuations. Please check offers and transactions to avoid any incidents.”
The Financial Supervisory Service and the exchange plan to closely monitor any abnormal price signals and conduct investigations into repeated market disruption activities for unfair trading.