Derivative Market to Open 15 Minutes Earlier Starting July 31

KOSPI 200 Futures and Others Open at 8:45 AM
Volatility Expected to Ease Early in Stock Market Opening
Anticipated Effect of Enhancing International Consistency

The derivatives market will open 15 minutes earlier than it currently does. It is expected that the volatility of stock prices in the early stages of the stock market opening will be alleviated, and the international consistency of the domestic derivatives market will also be enhanced.

The Korea Exchange announced on the 8th that from July 31, the opening time of the derivatives market will be changed to 8:45 AM. This is a follow-up measure to the direction of promoting early opening of the derivatives market discussed at the '2nd Seminar on Strengthening Global Competitiveness of Financial Investment Industry' held last April.

Currently, the domestic derivatives market, including KOSPI200 futures, opens at the same time as the stock market where the underlying assets are traded, since its establishment in 1996. The prices of derivatives concluded in the derivatives market reflect various predictions of market participants about the future prices of the underlying assets in advance. Therefore, it facilitates price discovery of the underlying assets. Unlike overseas markets, in Korea, the futures market and the spot market open simultaneously, making it difficult for stock investors to refer to (price discovery) derivatives prices in the early stages of the stock market opening.

Also, since the spot market and futures market open simultaneously, major fluctuations occurring before the opening have not been adjusted in advance in the futures market, which has been pointed out as an issue. During the process where price discovery occurs directly in the stock market, the volatility in the first 15 minutes of the stock market opening was higher compared to intraday stock market price volatility.

Accordingly, in accordance with international standards, the financial authorities and the exchange plan to open representative derivatives such as KOSPI200 futures 15 minutes earlier, from the current 9:00 AM to 8:45 AM, to alleviate volatility in the early stages of the stock market opening.

With the early opening of the derivatives market, the regular trading hours of the derivatives market will be extended by 15 minutes. The single price auction time will be reduced from the current 30 minutes to 15 minutes. The total order acceptance time in the derivatives market remains the same, from 8:30 AM to 3:45 PM. Applications for block trades and correction requests for erroneous trades related to early opening target products can be made from 8:45 AM.

However, to prevent excessive volatility expansion in the derivatives market due to the early opening, a price limit of ±8% will be applied to derivatives prices before the stock market opens (8:45 AM to 9:00 AM). In the regular derivatives market, when the first stage price limit (±8%) is reached, the price limit will be expanded to ±15% (second stage) after 5 minutes.

The exchange plans to first implement this for representative index products such as KOSPI200 futures and options, and then expand the early opening target derivatives products based on market demand and other factors.