US ATS Causes Investor Losses Due to One-Sided Trade Cancellations
90,000 Securities Accounts Affected by Trade Cancellations
Recently, due to disruptions in the US stock weekly trading service, approximately 90,000 investor accounts had trading amounts totaling 630 billion KRW canceled.
The Financial Supervisory Service (FSS) announced on the 7th that the amount refunded to investor accounts related to the cancellation of trades on the US weekly trading alternative trading system (ATS) Blue Ocean was calculated as such.
Nineteen domestic securities firms have contracts with Blue Ocean in the US stock market to provide a 'weekly trading' brokerage service for after-hours trading (Korean time 9 AM to 5 PM).
On the 5th, Blue Ocean unilaterally canceled all trades received after 2:45 PM Korean time due to a surge in investor orders caused by sharp volatility in the global stock market. As a result, the orders themselves were canceled, and both losses and gains from weekly trading stock transactions were nullified. Blue Ocean resumed trading only for 29 listed exchange-traded fund (ETF) items on the 7th after being closed on the 6th.
The FSS stated, "It is understood that Blue Ocean's trading system, whose main customers are Asian investors, experienced a failure due to exceeding processing limits caused by a surge in order volume," adding, "It is currently unknown whether trading for additional items will resume."
After the trade cancellations, securities firms selected the canceled trades through confirmation with local brokers and Blue Ocean, recalculated margins for each investor, and restored accounts to their original state before resuming order acceptance. The time required for this process varied by securities firm, so the timing of resuming order acceptance also differed by company. As of 3 PM that day, a total of 109 complaints related to this matter had been received by the FSS.
The FSS said, "This case was caused by a unilateral trade cancellation due to a system error in the local alternative trading system, making it difficult to definitively assign responsibility to domestic securities firms," and added, "We plan to minimize investor dissatisfaction by prioritizing voluntary adjustments between securities firms and investors."
It further stated, "Since weekly trading executes the entire trading volume of our investors through a single alternative trading system, investors need to exercise special caution," and added, "We will explore measures to enhance the stability of overseas stock investments."
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