Exchange System Failure... "Due to Conflict Between 'Mid-Price Quotes' and Existing Logic" (Comprehensive)

The Korea Exchange announced on the 18th that the cause of the system failure that occurred during trading was due to a conflict between the recently introduced 'mid-price quotes' by the alternative trading platform NextTrade and the existing logic.

After analyzing the cause of the failure that occurred in the morning, the exchange stated, "A delay in trade execution occurred because the quantity of mid-price quotes was omitted when calculating the trade execution quantity for the self-trade prevention condition quotes of the Dongyang Steel Pipe stock."

The self-trade prevention condition is a mechanism that prevents matching trades when the trading ID is the same. If buy and sell orders at the same price occur under the same ID, one side's quote is suspended.

In the Dongyang Steel Pipe trades that day, the self-trade prevention condition created a situation where only mid-price quotes and regular quotes existed, and due to the 'price truncation' characteristic of the mid-price quotes, a discrepancy occurred between the expected executable stock quantity and the actual executed stock quantity.

The mid-price quote is automatically adjusted to the midpoint price between the best bid and ask prices. For stocks with a quote price unit of 1 won (stocks priced below 2,000 won per share), the mid-price quote is 0.5 won, which is truncated to 0 won, causing a potential quantity error. Dongyang Steel Pipe was trading at 1,028 won just before the trading halt.

The system recognized this error, which caused the trading of the entire KOSPI stock group including Dongyang Steel Pipe to stop.

Due to this error, trading in the entire KOSPI market was halted for 7 minutes from 11:37 AM to 11:44 AM. Trading for other stocks except Dongyang Steel Pipe resumed normally afterward, but trading for Dongyang Steel Pipe remained suspended until around 12:05 PM when a trading suspension was imposed, and trading resumed at 3 PM.

After the market closed, the exchange held a company-wide inspection meeting to check for any other issues in the system's execution logic and confirmed that no additional problems were found.

Additionally, since the number of trading items on the alternative trading platform NextTrade will expand to 800 from the 31st, the exchange announced that joint inspections with NextTrade will be conducted every weekend until the end of April to prevent similar incidents.