Recently, there have been sharp fluctuations in stock prices during the pre-market trading hours on NextTrade, an Alternative Trading System (ATS), prompting financial authorities to urge investors to exercise caution.
On the 27th, the Financial Supervisory Service (FSS) stated, "Immediately after the start of trading during the pre-market hours on the alternative trading system, the initial price is formed at the upper or lower limit solely based on odd-lot orders, followed by a period with no price movement. Subsequently, as the price moves toward a normal level, repeated sharp fluctuations occur."
This phenomenon is attributed to the lower liquidity in the pre-market compared to the regular market and the method of determining the initial price through 'continuous trading' instead of 'single-price trading.'
The FSS explained that such cases are believed to result from one-time orders placed by investors who are not yet familiar with the pre-market opening price determination method. However, cases were also identified where a single account repeatedly submitted and executed upper or lower limit bids on multiple stocks.
The FSS warned, "If such cases expand and reproduce, there is a risk of distorting market prices or causing others to make erroneous judgments or misunderstandings. This could lead to follow-up trading due to price illusion effects, resulting in unexpected damages. Therefore, investors are strongly advised to exercise special caution."
They further explained that even small orders that could unfairly influence prices may be subject to market surveillance and preventive measures, and in severe cases, could be punished as market disorderly conduct or price manipulation.
Additionally, the formation of upper and lower price limits due to odd-lot trading in the pre-market is highly likely to cause temporary sharp price fluctuations. Therefore, investors should carefully monitor bid and execution situations to avoid potential damages.
The FSS stated, "The Financial Supervisory Service and Korea Exchange will closely monitor abnormal price signals arising from multi-market trading and take necessary preventive measures. For repeated market disruption activities, unfair trade investigations will be conducted to ensure market order is maintained."
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