"Extending Restaurant Hours Is Not Enough... Start by Improving the Side Dishes," Experts Advise [The Era of 24-Hour Trading Is Coming ③]

Experts Weigh In: Consensus on 24-Hour Direction
Selective Implementation Suggested for Top 100 KOSPI Stocks
Global Liquidity Inflow Is Key
"Strengthening Corporate Fundamentals Is Essential"

"Extending restaurant hours is not a cure-all. We need to start by improving the side dishes," said Andonghyeon, Professor of Economics at Seoul National University. "Even in Korea, it seems likely that a 24-hour trading era will open for at least a few products within the next five years, but the key issue is speed. We need to proceed sequentially," said Lee Hyoseop, Senior Research Fellow at the Korea Capital Market Institute.

Domestic capital market experts agree that the Korean stock market is headed toward a 24-hour trading system similar to the United States. However, they unanimously point out that the critical issues are the 'speed' and 'method' of implementation. They emphasize that, while mechanisms to control liquidity and volatility during nighttime trading must be established, it is also essential to first eliminate zombie companies and improve corporate fundamentals to attract foreign investors. In particular, since investment conditions such as liquidity differ from those in the United States, experts warn that Korea should not hastily follow the U.S. Nasdaq’s adoption of a 24-hour trading system without careful consideration.

Experts Say "24-Hour Trading Is Inevitable"-But Speed and Method Are Key

The Korea Exchange believes that, as competition has intensified domestically with the emergence of alternative trading systems, it is essential to first introduce 8 to 8 trading (12 hours) within the year and eventually establish a 24-hour trading system. Jeong Eunbo, Chairman of the Korea Exchange, has repeatedly cited the "establishment of a 24-hour trading system" as one of the requirements for enhancing global competitiveness in recent public appearances. As the environment of global capital markets, which now transcend borders, is rapidly changing with developments such as securities tokenization, the consensus is that 24-hour trading is ultimately unavoidable.

The key issue is not the direction, but the speed and method. Professor An stated, "The direction toward 24-hour trading is correct," but added, "We should first make improvements before opening the market," expressing a cautious stance. He pointed out, "For a 24-hour trading system to take root, foreign investors need to participate more than domestic investors. If the market consists only of individual investors, there will be issues with price discovery." This concern about liquidity was also highlighted as a major challenge the Korean stock market may face in the future by Brandon Tepper, Senior Vice President at Nasdaq, in an interview with The Asia Business Daily.

Professor An further noted, "Ultimately, those gaps must be filled by foreigners, but this raises currency exchange issues. 24-hour won trading must be possible, but that is not easy." The 24-hour foreign exchange market system has long been discussed in relation to Korea's inclusion in the MSCI Developed Markets Index, and the government has also shown a positive stance on the matter. However, there are immediate concerns, such as the burden on banks to operate 24-hour trading desks, and the possibility of increased exchange rate volatility due to foreign speculative forces cannot be ignored. Research Fellow Lee also stated, "The global trend toward a 24-hour trading system is inevitable," but emphasized, "The real issue is which products to start with and the specifics of the strategy."

Song Kimyeong, Executive Director of the KRX Stock Market Division, said, "It is premature to discuss whether the transition to a 24-hour system should take several years," but added, "Tokenization is progressing rapidly worldwide. If companies like Robinhood want to take 10 million shares of Samsung Electronics and tokenize them for trading as stablecoins, there are no technical issues even now," highlighting the necessity of 24-hour trading. A high-level industry official, speaking on condition of anonymity, said, "It is only a matter of time; the justification is clear," but pointed out, "If we move to 24-hour trading, there will inevitably be vulnerable time slots with drastically reduced trading volume. The biggest issue in such cases will be manpower."

Numerous Challenges Remain, Including Liquidity Support... "Implement Only for Select Blue-Chip Stocks"

To usher in the 24-hour era, there are numerous issues to consider beyond simply expanding on-site personnel and systems. Research Fellow Lee likened a 24-hour stock trading system to "nighttime opening at an amusement park," saying, "We need to consider who will come, who will manage it, whether it will be profitable, and how to handle accidents. There must be liquidity providers for stocks that do not trade actively."

According to a survey conducted by The Asia Business Daily of 15 domestic securities firms, the institutional requirements deemed necessary for expanding the trading system included: ▲liquidity support mechanisms for nighttime trading, ▲volatility control mechanisms, ▲strengthening incentives for market makers, and ▲integrated operational guidelines. In a separate anonymous survey of 90 individual investors conducted during the same period, detailed opinions included: ▲implementing the system only for select blue-chip stocks, ▲eliminating zombie companies, ▲advancing disaster recovery (DR) systems to respond immediately to system errors, and ▲establishing systems to prevent price manipulation by investment groups. Jeong Euijeong, President of the Korea Stock Investors Association, requested, "Before expanding trading hours, I hope there will be a thorough process for gathering the opinions of individual investors."

From a regulatory perspective, the concerns run even deeper. A high-level official, speaking anonymously, raised the issue of information asymmetry among investors if certain companies were to release surprise disclosures in the early morning under a 24-hour system, questioning, "Is this really desirable?" He also pointed out the need to consider whether mechanisms such as circuit breakers and sidecars, which are triggered by sharp price fluctuations, should be applied under the same conditions during late-night hours.

Accordingly, there is growing support for operating only select stocks when introducing a 24-hour system, alongside improvements in corporate fundamentals. Research Fellow Lee stated, "KOSPI 200 futures are essentially moving toward 24-hour trading. While there should be no major issues with KOSPI 200 constituents, there is no need to extend 24-hour trading to the remaining 2,000 or so stocks," adding, "It seems feasible to introduce the system first for the top 50 KOSPI stocks."

Professor An suggested, "We could consider an alternative of operating only the top 100 KOSPI stocks," emphasizing, "The key is whether we can attract additional global liquidity, and the only way to do that is for companies to improve their fundamentals." The argument that Korea could fall behind in global competitiveness is essentially, "If only we close our doors, we will lose all our customers." However, he pointed out, "Simply extending business hours is not enough; the quality of the side dishes must be improved first."

This view is in line with the calls from investors who have advocated for improvements in corporate governance and the elimination of zombie companies to resolve the so-called "Korea Discount" (the undervaluation of the Korean stock market). Professor An added, "Rather than blindly following Nasdaq into a 24-hour system, it may actually be more advantageous to shorten trading hours," stating, "It may be better to create abundant liquidity and concentrate investment within a shorter time frame."

This content was produced with the assistance of AI translation services.